[Federal Register Volume 85, Number 158 (Friday, August 14, 2020)]
[Rules and Regulations]
[Pages 49798-49828]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14589]



[[Page 49797]]

Vol. 85

Friday,

No. 158

August 14, 2020

Part IV





 Department of Education





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34 CFR Parts 600, 674 et al.





Federal Perkins Loan Program, Federal Work-Study Programs, Federal 
Supplemental Educational Opportunity Grant Program, Federal Family 
Education Loan Program, William D. Ford Federal Direct Loan Program, 
National Direct Student Loan Program, Teacher Education Assistance for 
College and Higher Education Grant Program, Federal Pell Grant Program, 
Leveraging Educational Assistance Partnership Program, and Gaining 
Early Awareness and Readiness for Undergraduate Programs; Final Rule

  Federal Register / Vol. 85, No. 158 / Friday, August 14, 2020 / Rules 
and Regulations  

[[Page 49798]]


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DEPARTMENT OF EDUCATION

34 CFR Parts 600, 674, 675, 676, 682, 685, 686, 690, 692, and 694

[Docket ID ED-2019-OPE-0081]
RIN 1840-AD40, 1840-AD44


Federal Perkins Loan Program, Federal Work-Study Programs, 
Federal Supplemental Educational Opportunity Grant Program, Federal 
Family Education Loan Program, William D. Ford Federal Direct Loan 
Program, National Direct Student Loan Program, Teacher Education 
Assistance for College and Higher Education Grant Program, Federal Pell 
Grant Program, Leveraging Educational Assistance Partnership Program, 
and Gaining Early Awareness and Readiness for Undergraduate Programs

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final regulations.

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SUMMARY: In response to the United States Supreme Court decision in 
Trinity Lutheran Church of Columbia, Inc. v. Comer (Trinity Lutheran), 
and the United States Attorney General's October 7, 2017 Memorandum on 
Federal Law Protections for Religious Liberty pursuant to Executive 
Order No. 13798 (Attorney General's memorandum), the Department of 
Education (Department or we) amends the current regulations regarding 
the eligibility of faith-based entities to participate in the Federal 
Student Aid programs authorized under title IV of the Higher Education 
Act of 1965, as amended (HEA), and the eligibility of students to 
obtain certain benefits under those programs. The Department also 
amends the Teacher Education Assistance for College and Higher 
Education (TEACH) Grant Program regulations to minimize the number of 
TEACH Grants that are converted to Federal Direct Unsubsidized Loans, 
and to update, strengthen, and clarify other areas of the TEACH Grant 
Program regulations.

DATES: 
    Effective date: These regulations are effective July 1, 2021.
    Implementation date: For the implementation dates of the included 
regulatory provisions, see the Implementation Date of These Regulations 
section of this document.

FOR FURTHER INFORMATION CONTACT: For information about the provisions 
of this regulation, contact Sophia McArdle at (202) 453-6318 or by 
email at [email protected].
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION:

Executive Summary

    Purpose of This Regulatory Action: Through this regulatory action, 
the Department responds to the United States Supreme Court decision in 
Trinity Lutheran Church of Columbia, Inc. v. Comer (Trinity Lutheran), 
137 S. Ct. 2012 (2017), and the United States Attorney General's 
October 7, 2017 Memorandum on Federal Law Protections for Religious 
Liberty pursuant to Executive Order No. 13798 (Attorney General's 
memorandum) \1\ in order to ensure that members of religious orders are 
not denied access to title IV funding or benefits under the title IV 
programs. The Department also amends the Teacher Education Assistance 
for College and Higher Education (TEACH) Grant Program regulations to 
minimize the number of TEACH Grants that are converted to Federal 
Direct Unsubsidized Loans, and to update, strengthen, and clarify other 
areas of the TEACH Grant Program regulations. A more detailed summary 
can be found in the Summary of the Major Provisions of This Regulatory 
Action section.
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    \1\ U.S. Att'y Gen. Memorandum on Federal Law Protections for 
Religious Liberty (Oct. 6, 2017) (hereinafter ``Mem.''), https://www.justice.gov/opa/press-release/file/1001891/download.
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    Summary of the Major Provisions of This Regulatory Action:
    To restore religious liberty to faith-based institutions and 
religious students, these regulations--
     Restore the ability of members of religious orders, who 
also are pursuing courses of study at institutions of higher education, 
to participate in the title IV programs by eliminating regulatory 
provisions that treat members of religious orders as having no 
financial need in certain circumstances.
     Allow certain borrowers, who serve as full-time volunteers 
in tax-exempt organizations and give religious instruction, conduct 
worship service, proselytize, or fundraise to support religious 
activities as part of their official duties, to defer repayment of 
Federal Perkins Loans, National Direct Student Loans (NDSLs), and 
Federal Family Education Loan Program (FFEL) loans.
     Provide an interpretation of the PSLF regulations that 
permits borrowers who work for employers that engage in religious 
instruction, worship services, or proselytizing to qualify for PSLF.
     Clarify requirements for private secondary and 
postsecondary faith-based institutions' participation in the GEAR UP 
program.
     Conform language in the Leveraging Educational Assistance 
Partnership Program (LEAP) and Federal Work-Study Programs (FWSP) 
regulations regarding allowable program activities to statutory 
language.
    For the TEACH Grant Program, the regulations--
     Clarify that grant recipients may satisfy the TEACH Grant 
service obligation by teaching for an educational service agency that 
serves low-income students.
     Clarify the beginning date of the eight-year period for 
completing the TEACH Grant service obligation.
     Revise the definition of ``highly qualified.''
     Update and expand the conditions under which a TEACH Grant 
recipient may satisfy the TEACH Grant service obligation by teaching in 
a high-need field listed in the Department's annual Teacher Shortage 
Area Nationwide Listing (Nationwide List) at https://tsa.ed.gov.
     Clarify the service obligation requirements for TEACH 
Grant recipients who withdraw from the institution where they received 
a TEACH Grant before completing the program for which they received the 
grant, then later re-enroll in the same program or in a different TEACH 
Grant eligible program at the same academic level.
     Provide that a TEACH Grant recipient may request reversal 
of a voluntary grant-to-loan conversion so that the recipient can 
complete the service obligation, as long as the service obligation is 
completed within eight years from when the grant recipient ceased 
enrollment at the institution where the recipient received the grant 
or, in the case of a student who received a TEACH Grant at one 
institution and subsequently transferred to another institution and 
enrolled in another TEACH Grant-eligible program, within eight years of 
ceasing enrollment at the other institution, excluding periods of 
suspension, which the recipient could apply for retroactively.
     Expand the information that is provided to TEACH Grant 
recipients during initial, subsequent, and exit counseling, and add a 
new conversion counseling requirement for grant recipients whose TEACH 
Grants are converted to Direct Unsubsidized Loans.
     Provide counseling requirements for TEACH Grant recipients 
who receive

[[Page 49799]]

reversals of voluntary grant-to-loan conversions.
     Add new conditions under which a TEACH Grant recipient may 
receive a temporary suspension of the eight-year period for completing 
the service obligation and for grant recipients whose grants were 
converted to loans in error and who need additional time to complete 
the teaching service obligation once the error is corrected.
     Remove the current regulatory requirement for TEACH Grant 
recipients to certify, within 120 days of completing the program for 
which they received TEACH Grants, that they have begun qualifying 
teaching service, or that they have not yet begun teaching, but they 
intend to satisfy the service obligation.
     Simplify the regulations specifying the conditions under 
which TEACH Grants are converted to Direct Unsubsidized Loans so that 
for all grant recipients, loan conversion will occur only if the 
recipient asks the Secretary to convert his or her TEACH Grants to 
loans, or if the recipient fails to begin or maintain qualifying 
teaching service within a timeframe that would allow the recipient to 
satisfy the service obligation within the eight-year service obligation 
period.
     Specify that the Secretary will send grant recipients, at 
least annually, a notice containing detailed information about the 
TEACH Grant service obligation requirements, a summary of the grant 
recipient's progress toward satisfying the service obligation, and an 
explanation of the process by which a grant recipient whose TEACH 
Grants are converted to Direct Unsubsidized Loans may request 
reconsideration of the conversion if he or she believes that the grants 
were converted in error.
     Provide that grant recipients will be automatically 
provided with a ``statement of error'' when a grant that was 
incorrectly converted to a loan is later reconverted to a TEACH Grant.
     Describe the actions that the Secretary will take if a 
grant recipient's request for reconsideration of the conversion of the 
grant to a loan is approved or denied.
     Specify that the Secretary will notify a grant recipient 
in advance of the date by which he or she will be subject to loan 
conversion for failure to begin or maintain qualifying teaching service 
within a timeframe that would allow the recipient to complete the 
service obligation within the eight-year service obligation period, and 
inform the recipient of the final date by which he or she must provide 
documentation of teaching service to avoid having his or her grants 
converted to loans.
     Incorporate statutory changes and update, simplify, and 
clarify various areas of the TEACH Grant Program regulations.

Costs and Benefits

    As discussed in the Regulatory Impact Analysis section of this 
notice, the Department estimates that these final regulations would not 
result in significant costs. Changes regarding faith-based institutions 
and religious students have minimal impacts on financial aid costs to 
the Federal government because these provisions affect relatively few 
students and borrowers. Changes regarding the PSLF program to comply 
with the Religious Freedom Restoration Act (RFRA) carry potential costs 
related to a relatively small increase in the population of eligible 
recipients. Changes regarding the GEAR UP program have no estimated 
costs as participation in the Department's competitive grant programs 
is voluntary, and the program currently serves a small number of 
religiously affiliated schools. While changes to the TEACH Grant 
Program improve the reporting and documentation process for recipients 
and increase the number of teaching positions in which TEACH Grant 
recipients could satisfy their service obligations, we do not believe 
that the changes would result in a significant increase in the number 
of grant recipients.
    Implementation Date of These Regulations: Section 482(c) of the HEA 
requires that we publish regulations affecting programs under title IV 
of the HEA in final form by November 1, prior to the start of the award 
year (July 1) to which they apply. However, that section also permits 
the Secretary to designate any regulation as one that an entity subject 
to the regulations may choose to implement earlier and the conditions 
for early implementation.
    The Secretary is exercising her authority under section 482(c) of 
the HEA to designate the regulatory changes to regulations at title 34, 
parts 600, 674, 675, 676, 682, 685, 686, 690, 692, and 694, of the Code 
of Federal Regulations included in this document for early 
implementation beginning on August 14, 2020, at the discretion of each 
institution, or each agency, as appropriate. The Department will 
implement the regulations as soon as possible after the implementation 
date and will publish a separate notice announcing the timing of the 
implementation. Otherwise, the final regulations included in this 
document are effective July 1, 2021.
    Public Comment: In response to our invitation in the notice of 
proposed rulemaking (NPRM) published in the Federal Register on 
December 11, 2019 (84 FR 67778), we received 46 comments on the 
proposed regulations. We do not discuss comments or recommendations 
that are beyond the scope of this regulatory action or that would 
require statutory change. Generally, we do not address technical or 
other minor changes.

Analysis of Comments and Changes

    We developed these regulations through negotiated rulemaking. 
Section 492 of the HEA requires that, before publishing any proposed 
regulations to implement programs under title IV of the HEA, the 
Secretary must obtain public involvement in the development of the 
proposed regulations. After obtaining advice and recommendations, the 
Secretary must conduct a negotiated rulemaking process to develop the 
proposed regulations. The negotiated rulemaking committee reached 
consensus on the proposed regulations that we published on December 11, 
2019 (84 FR 6778). The Secretary requested comments on the proposed 
regulations by January 10, 2020, and 46 parties submitted comments. An 
analysis of the comments and of the changes in the regulations since 
publication of the NPRM follows.
    We group major issues according to subject, with appropriate 
sections of the regulations referenced in parentheses. We discuss other 
substantive issues under the sections of the regulations to which they 
pertain. Generally, we do not address minor, non-substantive changes, 
recommended changes that the law does not authorize the Secretary to 
make, or comments pertaining to operational processes. We also do not 
address comments pertaining to issues that were not within the scope of 
the NPRM.

Faith-Based Entities

General Comments

    Comments: Many commenters supported the proposed changes, because 
the proposed revisions better reflect the demands of the Free Exercise 
and Free Speech Clauses of the First Amendment to the United States 
Constitution and the current understanding of the Establishment Clause 
of the First Amendment. One commenter noted that even if Trinity 
Lutheran had not been decided and the Attorney General's memorandum had 
not been issued, the Department's proposed changes would be necessary 
to bring the Department's regulations into

[[Page 49800]]

compliance with four decades of Supreme Court jurisprudence, including 
Widmar v. Vincent,\2\ Rosenberger v. University of Virginia,\3\ and 
Witters v. Washington Department of Services for the Blind.\4\ In 
particular, the commenter noted that the Free Exercise Clause prohibits 
the government from imposing ``special disabilities'' on individuals or 
institutions based on their religious views or status. The commenter 
also noted that RFRA prohibits the Federal government from 
substantially burdening a person's religious exercise unless it can 
demonstrate a compelling interest unachievable by less restrictive 
means. Another commenter stated that the proposed regulations would 
provide relief to qualified student borrowers while maintaining 
critical safeguards to prevent Federal funds from being diverted to 
religious purposes.
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    \2\ 454 U.S. 263 (1981)(holding unconstitutional a university's 
exclusion of religious groups from the use of school facilities made 
available to other student groups and holding that such use would 
not have the ``primary effect'' of advancing religion in violation 
of the Establishment Clause).
    \3\ 515 U.S. 819 (1995) (finding that, to abide by the 
Establishment Clause, it was not necessary for a university to deny 
eligibility to a student publication seeking to print religious 
viewpoints).
    \4\ 474 U.S. 481 (1986) (holding that the Establishment Clause 
permitted a State to extend assistance to a blind person who chose 
to study at a religious college to become a pastor, missionary, or 
youth director).
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    Discussion: We appreciate the commenters' support.
    Changes: None.
    Comments: Some commenters supported the faith-based provisions of 
the proposed regulations and encouraged the Department to early 
implement the new provisions.
    Discussion: We agree that institutions should have the ability to 
early implement the faith-based provisions of the final regulations 
where possible, and that borrowers should similarly benefit from early 
implementation by the Department of regulatory changes that affect 
their ability to qualify for certain loan repayment benefits. 
Instructions regarding early implementation are discussed in the 
Implementation Date of These Regulations section of this preamble.
    Changes: The Department provides instructions regarding early 
implementation in the Implementation Date of These Regulations section 
of this preamble.
    Comments: Several commenters opposed the Department's faith-based 
proposed regulations, arguing that the regulations misapply Supreme 
Court precedent. These commenters expressed concerns that the 
Department ignored relevant case law in the NPRM, including Mitchell v. 
Helms \5\ and Locke v. Davey.\6\ Commenters also asserted that RFRA 
does not apply to the Department's current regulations, since a 
borrower who desires to perform non-qualifying work should not receive 
public benefits.
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    \5\ These commenters cited Justice O'Connor's concurrence, in 
which she disagreed with ``the plurality's conclusion that actual 
diversion of government aid to religious indoctrination is 
consistent with the Establishment Clause'' and explained ``that we 
have long been concerned that secular government aid not be diverted 
to the advancement of religion.'' 530 U.S. 793, 840 (2000) 
(O'Connor, J., concurring in the judgment).
    \6\ 540 U.S. 712, (2004) (finding that preventing the use of 
public funds for devotional theology instruction does not violate 
the Free Exercise Clause).
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    Commenters opined that the current regulations are sufficient to 
protect citizens' religious freedoms, and that the proposed regulations 
regarding title IV programs would subsidize religious activities. These 
commenters expressed concern that the Department's proposed regulations 
would favor religious institutions over their secular counterparts and 
would therefore violate the Establishment Clause. Commenters pointed to 
the facts in Locke v. Davey and argued that the State in that case 
refused to extend government funding to Davey, not because of his 
religious status, but because of how he proposed to use the funding--to 
study theology. These commenters argued that, because the grantees and 
recipients at issue in the Department's regulations are religious, they 
will use grants or deferments in a manner similar to Davey and will 
therefore violate the Establishment Clause. One commenter also pointed 
out that the Establishment Clause still prohibits the government from 
awarding funds for a religious purpose or with an effect of advancing 
religion.
    Other commenters stated that Trinity Lutheran has no precedential 
value with respect to the Department's regulations. They claimed that 
the Court in that decision limited its holding to discrimination based 
on religious identity only with respect to playground resurfacing. One 
commenter disapproved of the Department's reliance on Trinity Lutheran 
to justify its changes but recognized that the Department's changes 
would not require public funds to be used for religious purposes, and 
therefore expressed support for the changes. But that commenter stated 
that the Department did not need to cite Trinity Lutheran to support 
its final regulations.
    Discussion: The Department agrees with commenters that it must not 
violate the Establishment Clause's prohibition on government 
advancement of religion. The Department agrees that Congress may bar 
the use of government funds for religious purposes consistent with the 
Supreme Court's holding in Locke v. Davey if it wished to do so. We 
also agree that the Department may provide direct aid to religious 
institutions without having the effect of advancing religion as long as 
there is no governmental indoctrination, religion is not used to define 
recipients, and there is no excessive governmental entanglement with 
religion, consistent with Mitchell v. Helms.\7\
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    \7\ 530 U.S. 793 at 808.
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    The Department does not agree, however, with those commenters who 
argued that the Establishment Clause requires the Department's previous 
prohibitions in order to bar the use of government funds to advance 
religion or for religious purposes. Those commenters urged the 
Department to go beyond the requirements of the Establishment Clause. 
The Supreme Court has made it clear that a ``policy preference'' of 
``achieving greater separation of church and State than is already 
ensured under the Establishment Clause'' is insufficient to justify 
excluding religious organizations from generally available benefits. 
Trinity Lutheran, 137 S. Ct. at 2024 (quoting Widmar v. Vincent, 454 
U.S. 263, 276 (1981)). Indeed, there is substantial Supreme Court 
precedent supporting the proposition that the government must not 
discriminate against individuals or entities on the basis of their 
religious identity. See, e.g., Trinity Lutheran, 137 S. Ct. at 2019; 
Church of the Lukumi Babalu Aye, Inc. v. Hialeah, 508 U.S. 520, 533, 
542 (1993); McDaniel v. Paty, 435 U.S. 618, 626 (1978) (plurality 
opinion); Everson v. Bd. of Educ. of Ewing, 330 U.S. 1, 16 (1947).
    Some commenters also stated the Department's changes to eligibility 
requirements for certain aid would have the effect of advancing 
religion. The Department's aid will not advance religion, nor do the 
Department's changes require aid to be used for religious purposes. In 
the final regulations, the Department is correcting prior rules that 
disfavored faith-based institutions and students--not, as some 
commenters worried, to favor them over their secular counterparts. The 
changes affecting faith-based institutions and individuals in the final 
regulations fall into two broad categories: First, the eligibility of 
faith-based entities to participate in Federal Student Aid programs 
under title IV of the HEA; and second, the

[[Page 49801]]

eligibility of students to obtain benefits under those programs. 
Accordingly, the final rules permit members of a religious order to 
receive aid under title IV programs, including the Federal Pell Grant 
Program, the Federal Perkins Loan Program, the FWSP, the Federal 
Supplemental Educational Opportunity Grant Program (FSEOG) Program, the 
FFEL Program, and the Direct Loan Program. Also, the rules allow 
private secondary and postsecondary faith-based educational 
institutions to participate in GEAR UP. The final regulations set 
religious individuals and entities on equal footing with their secular 
counterparts by allowing such individuals and entities to qualify for 
the same aid already available to nonreligious individuals and 
entities. Therefore, such treatment is correcting an inequality, not 
creating one.
    Because of such inequality, the Department does not agree with the 
commenter who argued that RFRA is not implicated by the Department's 
current rules excluding religious individuals and entities from the 
ability to participate in generally available benefit programs. 
Congress has tasked the Department with the duty to ensure that the 
Department's actions, including its regulatory actions, do not 
substantially burden a person's exercise of religion (absent a 
compelling government interest and a showing that the burden is the 
least restrictive means of furthering that interest). 42 U.S.C. 2000bb, 
et seq. Because the current regulations discriminate against religious 
groups and deny individuals the ability to participate in important 
government programs on the basis of their religious status, the current 
regulations likely amount to a substantial burden on those entities' 
exercise of religion.
    RFRA defines ``religious exercise'' as ``any exercise of religion, 
whether or not compelled by, or central to, a system of religious 
belief.'' 42 U.S.C. 2000bb-2(4) (citing 42 U.S.C. 2000cc-5). The 
current rules impose a ``penalty'' on these individuals' free exercise 
of religion, Trinity Lutheran, 137 S. Ct. at 2021--which they engage in 
by becoming members of religious orders, attending religious 
institutions, participating in or working at religious organizations, 
among other ways--by requiring them to ``choose between their religious 
beliefs and receiving a government benefit.'' Id. at 2023 (quoting 
Locke, 540 U.S. at 720-21); see Sherbert v. Verner, 374 U.S. 398, 404 
(1963) (finding a substantial burden where it was ``apparent that 
appellant's declared ineligibility for benefits derives solely from the 
practice of her religion,'' forcing her ``to choose between following 
the precepts of her religion and forfeiting benefits, on the one hand, 
and abandoning one of the precepts of her religion in order to accept 
work, on the other hand''); see also 42 U.S.C. 2000bb(b)(1) (``The 
purposes of this chapter are--(1) to restore the compelling interest 
test as set forth in Sherbert v. Verner, 374 U.S. 398 (1963) and 
Wisconsin v. Yoder, 406 U.S. 205 (1972) and to guarantee its 
application in all cases where free exercise of religion is 
substantially burdened . . .'').
    And the Department's status-based restrictions are neither 
necessary to further a compelling government interest, nor are they the 
least restrictive means of furthering any such interest. Therefore, 
RFRA would require the Department to alleviate the substantial burden 
imposed by its regulations.
    The Department also disagrees with one commenter's suggestion that 
RFRA does not apply at all; the statute binds the ``Government'' which 
includes the Department in its regulating capacity, 42 U.S.C. 2000bb-
1(a), and further ``applies to all Federal law, and the implementation 
of that law, whether statutory or otherwise, and whether adopted before 
or after November 16, 1993.'' 42 U.S.C. 2000bb-3(a).
    The Department disagrees with commenters who claimed that the 
Department's current rules are sufficiently protective of religious 
freedom. The Supreme Court has upheld some religious-funding 
restrictions,\8\ but those decisions are in considerable tension with 
more recent Supreme Court cases that recognized that the First 
Amendment permits--and in some situations, requires--the government to 
provide religious organizations with access to government property 
under neutral and generally applicable rules. Additionally, the Supreme 
Court has repudiated the principle that the Establishment Clause bars 
government aid from flowing from religiously neutral government 
programs to religious institutions. See, e.g., Mitchell v. Helms, 530 
U.S. at 835 (plurality opinion) (overruling Wolman v. Walter, 433 U.S. 
229 (1977) and Meek v. Pittenger, 421 U.S. 349 (1975)); id. at 837 
(O'Connor, J., concurring in the judgment) (same); Agostini v. Felton, 
521 U.S. 203, 235 (overruling Aguilar v. Felton, 473 U.S. 402 (1985) 
and School District of the City of Grand Rapids v. Ball, 473 U.S. 373 
(1985)).
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    \8\ See Tilton v. Richardson, 403 U.S. 672, 683 (1971), and 
Committee for Public Education & Religious Liberty v. Nyquist, 413 
U.S. 756, 762 (1973).
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    The Supreme Court has made it clear that the government should be 
``neutral in its relations with groups of religious believers and non-
believers; [the Establishment Clause] does not require the state to be 
their adversary.'' Everson v. Board of Education, 330 U.S. 1, 18 
(1947). And a law that burdens religious practice that is not neutral 
and not generally applicable ``must undergo the most rigorous of 
scrutiny'' under the Free Exercise Clause. Church of the Lukumi Babalu 
Aye, Inc. v. City of Hialeah, 508 U.S. 520, 546 (1993).
    In Trinity Lutheran, the Court reiterated that this 
nondiscrimination principle of the Free Exercise Clause applies to 
government benefits and funding. The Court in that case rejected the 
State's interest in ``skating as far as possible from religious 
establishment concerns'' as a basis for categorically excluding a 
religious organization from a generally available funding program. 
Trinity Lutheran, 137 S. Ct. at 2024. The Court applied ``the most 
exacting scrutiny'' to the government program, finding that it 
``expressly discriminate[d]'' against an entity that would be otherwise 
eligible for the government grant but for that entity's religious 
character. Id.
    That same basic defect is present in the Department's current 
regulations: But for the entities' and individuals' religious 
character, they would have qualified for government aid under title IV. 
For example, under current 34 CFR 674.9(c)(1), a student is prohibited 
from receiving a Federal Perkins Loan if that student was a ``member of 
a religious order'' that has as its primary objective ``the promotion 
of ideals and beliefs regarding a Supreme Being'' and which required 
its members to forego monetary support and receive subsistence support 
from the order. Because the restriction only applies to individuals 
based on an individual's members in a religious order, that restriction 
is based on the individual's religious status. The Department believes 
that otherwise-eligible students and institutions should not be denied 
participation in title IV programs based solely on their religious 
identities and, furthermore, that the Free Exercise Clause prohibits 
such status-based religious discrimination.
    The Department considered commenters' concerns that its changes 
amount to government subsidies for religious activities. These 
commenters included discussions of Locke v. Davey, which the Supreme 
Court distinguished in Trinity Lutheran as a case in which the 
recipient was denied a scholarship not because of who he was, but 
because

[[Page 49802]]

of how he proposed to use the government funding--to prepare for 
ministry. See Trinity Lutheran, 137 S. Ct. at 2023. Under this 
analysis, the Court demonstrated that the constitutionality of an aid 
restriction depends on whether the restriction is predicated on the 
recipient's religious status (which is presumptively unconstitutional), 
or whether it is based upon how the Federal aid will be used (which is 
a permissible restriction under Locke but not required under the Free 
Exercise Clause). Thus, a state could disallow or allow federal aid to 
be used for religious instruction under Locke.
    Some commenters argued that the current regulations fall within the 
latter category--that allowing religious individuals and entities to 
qualify for Federal aid would amount to promoting religion, because the 
recipients would use their aid to practice their religion. But those 
regulations deny eligibility based on a person's membership in a 
religious order (see, e.g., 34 CFR 674.9), or because a person chose to 
perform volunteer work for a religious organization providing services 
to the community (see, e.g., 34 CFR 674.35(c)(5)(iv)). These 
restrictions are on the basis of a person's or entity's religious 
identity; they are not use-based restrictions. Additionally, Locke v. 
Davey held that the government may refuse to use government funds for a 
degree in devotional theology; that decision does not require the 
government to refuse to do so. The Department's determination of how to 
use any leeway allowed under Locke v. Davey must be guided by policy 
and legal considerations, including the statutory mandate of RFRA.
    The Supreme Court has long held that the government may furnish 
``general . . . benefits to all its citizens without regard to their 
religious belief.'' Everson, 330 U.S. at 16. In cases following 
Everson, the Court consistently affirmed that an important factor in 
upholding Government aid programs against an Establishment Clause 
attack is those programs' ``neutrality towards religion.'' Good News 
Club v. Milford Central School, 533 U.S. 98, 114 (2001) (quoting 
Rosenburger, 515 U.S. at 839). The Constitution is ``respected, not 
offended,'' when the Government employs neutral criteria and extends 
benefits to ``recipients whose ideologies and viewpoints, including 
religious ones, are broad and diverse.'' Rosenberger, 515 U.S. at 839 
(emphasis added). In Mitchell, a plurality of justices endorsed the 
bright-line rule that neutral, generally available Government aid does 
not violate the Establishment Clause. See 530 U.S. at 809-14. Later, in 
Zelman v. Simmons-Harris, the Supreme Court held that a school voucher 
program did not need to exclude religious recipients to comply with the 
Establishment Clause. See Zelman, 536 U.S. 639, 653-60 (2002). The U.S. 
Department of Justice, Office of Legal Counsel has likewise held that, 
in some circumstances, the Government may provide aid to sectarian or 
religious entities.\9\ And finally, the Establishment Clause does not 
prohibit religious organizations from receiving Government benefits 
such as tax deductions and exemptions, which direct significant 
economic benefits to both religious and secular organizations, on an 
equal basis with secular organizations. See Walz, 397 U.S. at 674; 
Zelman, 536 U.S. at 665-68 (O'Connor, J., concurring) (discussing tax 
deductions and exemptions).
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    \9\ See Authority of the Department of the Interior to Provide 
Historic Preservation Grants to Historic Religious Properties Such 
as the Old North Church, 27 Op. O.L.C. 91, 114 (2003) (concluding 
that the Department of the Interior could provide historic 
preservation grants to renovate a still-active house of worship); 
Authority of FEMA to Provide Disaster Assistance to Seattle Hebrew 
Academy, 26 Op. O.L.C. 114, 129 (2002) (opining that FEMA could 
provide disaster relief funds for reconstruction after an earthquake 
to a Hebrew secondary school).
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    Commenters also argued that the Department errs in relying on 
Trinity Lutheran. They argued that, according to footnote 3 in the 
decision, Trinity Lutheran applies only to the narrow factual 
circumstance of a church-run school seeking to compete for a playground 
resurfacing grant.
    But footnote 3 is not part of the majority opinion in Trinity 
Lutheran, because two of the six Justices in the majority opinion 
joined the opinion ``except as to footnote 3.'' Trinity Lutheran, 137 
S. Ct. at 2016. In any event, footnote 3 does not limit the force of 
the Court's reasoning.
    The Court has long held that ``[w]hen an opinion issues for the 
Court, it is not only the result but also those portions of the opinion 
necessary to that result by which we are bound.'' Seminole Tribe of 
Florida v. Florida, 517 U.S. 44, 67 (1996). And even broadly applicable 
principles discussed by the Supreme Court often lead to the creation of 
generally applicable legal rules. See Antonin Scalia, The Rule of Law 
as a Law of Rules, 56 U. Chi. L. Review 1175, 1175-81 (1989). Indeed, 
in explaining why he did not join footnote 3, Justice Gorsuch asserted 
that the court's cases are governed by general principles, rather than 
ad hoc improvisations.'' Trinity Lutheran, 137 S. Ct. at 2023 (quoting 
Elk Grove Unified School Dist. v. Newdow, 542 U.S. 1,25 (2004) 
(Gorsuch, J., concurring in part)). Here, the majority opinion in 
Trinity Lutheran recognized that the Court had ``repeatedly confirmed 
that denying a generally available benefit solely on account of 
religious identity imposes a penalty on the free exercise of religion 
that can be justified only by a state interest of the highest order.'' 
Id. at 2019 (majority op.). It confirmed that this principle applies to 
``the refusal to allow [a Church plaintiff]--solely because it is a 
church--to compete with secular organizations for a grant,'' id. at 
2022, and it rejected the argument that a ``policy preference for 
skating as far as possible from religious establishment concerns'' 
could justify such refusal, id. at 2024. This reasoning is persuasive 
and applicable here.
    Changes: None.
    Comments: One commenter raised concerns that the Department 
subjected constitutional principles to negotiated rulemaking 
inappropriately and that there were few stakeholders with expertise in 
church and State issues on the negotiated rulemaking committee.
    Discussion: The HEA requires the Department to regulate all issues 
relating to title IV of the HEA through a negotiated rulemaking 
process. The Department followed the requirements of the HEA when 
negotiating these issues. To ensure adequate expertise on church and 
State issues, the Department created a subcommittee that met three 
times for a total of six days to discuss thoroughly the issues relating 
to church and State, including extensive discussion regarding the 
constitutional issues implicated by the proposed regulations. The 
subcommittee consisted of nine members, all of whom had extensive 
knowledge and experience with respect to church and State issues. 
Representatives of national organizations that have litigated both 
sides of these issues in Federal courts served on the subcommittee.
    Subcommittee representatives presented their proposals and analysis 
to the full committee multiple times during the negotiated rulemaking. 
Both sides of issues, those for and against the Department's proposed 
amendments to the regulations, were presented to the full committee. 
Additionally, multiple members of the full committee worked for faith-
based organizations or otherwise had experience working on church and 
State issues.
    The Department agrees with the commenters that the work of the 
negotiated rulemaking committee cannot overrule the Constitutional 
opinions of the U.S. Supreme Court, including cases like Trinity 
Lutheran. As a result, the Department has tailored

[[Page 49803]]

the final rule to be consistent with those opinions, as further 
described herein.
    Changes: None.

Student Eligibility (Sec.  674.9); Student Eligibility (Sec.  675.9); 
Student Eligibility (Sec.  676.9); Eligibility of Borrowers for 
Interest Benefits on Stafford and Consolidation Loans (Sec.  682.301); 
Borrower Eligibility (Sec.  685.200); Determination of Eligibility for 
Payment (Sec.  690.75)

    Comments: The Department received comments on its proposal to 
remove provisions in Sec. Sec.  674.9, 675.9, 676.9, 682.301(a)(2), 
685.200, and 690.75 that specify that a member of a religious order is 
considered to have no financial need if the religious order has as its 
primary objective the promotion of ideals and beliefs regarding a 
supreme being, requires its members to forgo monetary or other support 
substantially beyond the support its provides, and directs the member 
to pursue the course of study or provides subsistence support to its 
members.
    Some commenters agreed with the proposed removal, indicating that 
the current language violates the Free Exercise and the Free Speech 
Clauses. Specifically, commenters noted that religious observance, 
including vows of poverty and obedience, are protected by the First 
Amendment of the United States Constitution and should not be cited as 
a reason for exclusion from Federal student aid programs.
    Other commenters opposed the proposed removal, because they believe 
that without the current regulatory language, the Department would be 
subsidizing inherently religious activities, such as religious 
education and proselytizing, in violation of the Establishment Clause. 
One commenter further indicated that the procedural history of the 
regulations indicates that the rationale for the current regulations is 
not based on belief but on real-world considerations of financial 
status of individuals in religious orders who may receive financial 
subsidies even if they do not have an income.
    Discussion: The Department thanks commenters who supported the 
proposed change. The Department disagrees that the proposed regulations 
would cause the Department to subsidize inherently religious 
activities. The Department would merely be providing financial aid for 
otherwise eligible students to attend postsecondary education 
regardless of their membership in a religious order and without 
considering that order's primary objective. Financial aid funds would 
go to individual students who have demonstrated financial need to 
attend postsecondary education and would not fund religious activities. 
An independent decision by a student aid recipient to participate in 
inherently religious activities does not create a government subsidy of 
those activities.
    The formulas for determining financial need in U.S. Code Part F 
consider subsidies received by students from any entity, including 
religious and non-religious entities. The current regulatory language 
that specifies that members of religious orders are presumed not to 
have need singles out such members for differential treatment and is 
likely not narrowly tailored to address a compelling interest. Such a 
provision also unnecessary for determining financial need as the 
formulas are themselves sufficient.
    Changes: None.

Deferment of Repayment--Federal Perkins Loans Made Before July 1, 1993; 
Deferment of Repayment--NDSLs Made on or After October 1, 1993

    Comments: Many commenters supported proposed changes to Sec. Sec.  
674.35 and 674.36 that would remove language that denies deferment of 
repayment of certain Federal loans for borrowers working as volunteers 
if their volunteer duties include giving religious instruction, 
conducting worship services, proselytizing, or fundraising to support 
religious activities. Many commenters agreed with the Department that 
in some cases the provision of secular services is inextricably 
intertwined with inherently religious activities and that deferment 
provisions in the current regulations may violate the Free Exercise and 
Free Speech Clauses and RFRA. These commenters noted that the Federal 
government will not violate the Establishment Clause if it permits 
volunteers engaged in religious activities to defer loan repayment 
based on religiously neutral criteria. The commenters cited Zelman v. 
Simmons-Harris, 536 U.S. 639 (2002), Mitchell v. Helms 530 U.S. 793 
(2000), and other Supreme Court cases in support of their position.
    Other commenters opposed the removal of these provisions, 
indicating that allowing a borrower to be eligible for subsidies if the 
borrower works on inherently religious activities would be directly 
subsidizing individuals engaged in religious activities in violation of 
the Establishment Clause.
    Discussion: The Department thanks the commenters for their support. 
The Department agrees with the commenters who argued that the 
Establishment Clause would not be violated by the removal of these 
provisions. The Department believes that removal of these provisions is 
necessary to avoid violations of individuals' rights to freely exercise 
their religions and their free speech rights. These provisions do not 
violate the Establishment Clause because the Supreme Court has long 
held that the government may furnish general benefits to all its 
citizens without regard to their religious belief or their membership 
in a particular religious organization or sect. See Everson, 330 U.S. 
at 16 (holding that the State ``cannot exclude individual Catholics, 
Lutherans, Mohammedans, Baptists, Jews, Methodists, Non-believers, 
Presbyterians, or the members of any other faith, because of their 
faith, or lack of it, from receiving the benefits of public welfare 
legislation.''). In cases following Everson, the Court consistently 
affirmed that an important factor in upholding Government aid programs 
against an Establishment Clause attack is those programs' ``neutrality 
towards religion.'' Good News Club v. Milford Central School, 533 U.S. 
98, 114 (2001) (quoting Rosenburger, 515 U.S. at 839). The Constitution 
is ``respected, not offended,'' when the Government employs neutral 
criteria and extends benefits to ``recipients whose ideologies and 
viewpoints, including religious ones, are broad and diverse.'' 
Rosenberger, 515 U.S. at 839 (emphasis added). In Mitchell, a plurality 
of justices endorsed the bright-line rule that neutral, generally 
available government aid does not violate the Establishment Clause. See 
530 U.S. at 809-14.
    Under the current regulations, a borrower may be eligible for 
deferment if working as a full-time volunteer for a tax-exempt 
organization providing services to low-income persons and their 
communities to assist them in eliminating poverty and poverty-related 
human, social, and environmental conditions for at least one year. 
However, the regulation disqualifies that same borrower from deferment 
if he or she, as part of his or her duties, gives religious 
instruction, conducts worship services, engages in religious 
proselytizing, or engages in fundraising to support religious 
activities. The regulations thus disfavor borrowers participating in 
otherwise-eligible public services merely because that public service 
is performed from a religious perspective. For some borrowers, these 
restrictions may also impose a substantial burden on their free 
exercise of religion by forcing them to choose between such religious 
exercise and eligibility for loan deferments. No compelling government

[[Page 49804]]

interest warrants the imposition of such burdens. Ultimately, the 
eligibility requirements in these final regulations maintain the 
government's stance of neutrality towards religion by not disfavoring a 
particular type of public service.
    The Supreme Court has noted the distinction, for Establishment 
Clause purposes, between direct provision of government aid to a 
religious programs and indirect government aid that flows to religious 
programs based on private choice in its Establishment Clause cases. For 
example, in Zelman v. Simmons-Harris, the Supreme Court held that a 
school voucher program did not need to exclude religious recipients to 
comply with the Establishment Clause where funding would only reach 
such recipients following the private choice of the individual using 
the voucher. See Zelman, 536 U.S. 639, 653-60 (2002). Likewise, in this 
case, the borrower receiving the benefit of loan deferment under the 
regulation makes a private choice between different volunteer options 
in the community and therefore does not create an Establishment Clause 
problem by choosing to volunteer with a religious entity performing 
religious tasks. As a result of the intervening private choice of the 
borrower, ``no imprimatur of state approval can be deemed to have been 
conferred on any particular religion, or on religion generally'' by the 
borrower's receipt of a deferment for volunteer work. See Zelman, 536 
U.S. at 650 (internal citations, quotation marks omitted).\10\
---------------------------------------------------------------------------

    \10\ See also Am. Jewish Congress v. Corp. for Nat'l & Cmty. 
Serv., 399 F.3d 351 (D.C. Cir. 2005) (government agency placing 
teachers in religious schools did not violate Establishment Clause 
when some teachers chose to teach religion as well as secular 
subjects).
---------------------------------------------------------------------------

    Changes: None.

Eligible Employers and General Conditions and Limitation on Employment 
(Sec.  675.20)

    Comments: The Department received comments on proposed changes to 
Sec.  675.20 that would replace language in the FWSP regulations with 
language from Sec.  443(b)(1)(C) of the HEA to clarify that work 
performed under the FWSP may ``not involve the construction, operation, 
or maintenance of so much of any facility as is used or is to be used 
for sectarian instruction or as a place for religious worship.'' 
Several commenters stated that the statutory language is problematic 
but is clearer than the current regulatory language.
    One commenter indicated that both the statute and the regulation 
fail to define ``sectarian instruction.'' That commenter wondered 
whether the term includes only inherently religious instruction or 
whether it also includes efforts to integrate religious convictions 
into other subjects.
    Several commenters indicated that the statutory language includes 
unjustified discrimination against religion, religious individuals, and 
religious activities in violation of the Free Exercise and Free Speech 
Clauses as well as RFRA. One commenter noted that the Department has 
the authority and an independent duty to obey the Constitution and RFRA 
regardless of the statutory language in the HEA.
    One commenter contended that the changes would allow FWSP students 
to serve in facilities dedicated solely to religious functions which 
would violate the separation of church and State.
    Discussion: The Department agrees with commenters that it has an 
independent duty to obey the Constitution and RFRA. The Department does 
not believe the statute is clearly unconstitutional under current 
Supreme Court precedent. Even when the Government has established a 
secular, neutral aid program, it may retain an interest in defining the 
program to exclude certain religious uses. See Religious Restrictions 
on Capital Financing for Historically Black Colleges and Universities, 
2019 WL 4565486 O.L.C. at 19. Under Locke v. Davey, the government--in 
this case, Congress--may lawfully decline to subsidize religious 
activity. See Locke, 540 at 720-21. It therefore does not appear that 
the FWSP restriction violates the Free Exercise Clause.
    Nor does the Department believe that the restriction necessarily 
runs counter to RFRA. It is true that RFRA applies retrospectively and 
prospectively to ``all Federal law, and the implementation of that law, 
whether statutory or otherwise, and whether adopted before or after'' 
its effective date, 42 U.S.C. 2000bb-3(a), including the FWSP 
restriction here. On the one hand, because the restriction is religious 
in nature, it is possible that the restriction could substantially 
burden the exercise of religion by institutions of higher education 
and/or individual student participants. The restriction appears to be 
aimed at preventing the use of government funds to support religious 
activities. However, the restriction is neither required by the 
Establishment Clause in light of the need for intervening private 
choice by an institution of higher education and an individual student 
participant before program funds could be linked with religious 
activity, see Zelman, 536 U.S. 639, 653-60 (2002), nor is it a 
compelling government interest for purposes of RFRA, as any remaining 
``policy preference for skating as far as possible from religious 
establishment concerns'' cannot qualify as a compelling government 
interest, see Trinity Lutheran, 137 S. Ct. at 2024. Thus, under RFRA 
the Department cannot enforce the FWSP restriction against any person 
whose exercise of religion is substantially burdened by such 
application. As a result, the Department has added language to that 
effect in the regulation to make clear how RFRA applies. Of course, 
even in the absence of such additional clarifying language, the 
Department interprets all of its statutes and regulations through the 
lens of RFRA because none of its statutes contains an explicit 
exemption from RFRA. 42 U.S.C. 2000bb-3(b).
    To the extent that the FWSP restriction does not substantially 
burden a person's exercise of religion, however, it does not appear to 
violate the Constitution or RFRA.
    In otherwise amending the regulation to conform to the statute, the 
Department intends to provide as much clarity and flexibility as 
possible within the confines of the HEA and to ensure adherence to the 
statute. Chapels and other religious structures are often part of 
larger multi-use facilities on college campuses. The Department wishes 
to clarify that FWSP students may construct, operate, or maintain 
portions of multiuse structures that are not dedicated solely to 
religious purposes.
    The Department disagrees with commenters who claimed that, under 
the statutory language, FWSP students would be involved in the 
construction, operation, or maintenance of facilities dedicated solely 
to religious functions. The statutory language precludes such 
opportunity by specifying that work performed under the FWSP may ``not 
involve the construction, operation, or maintenance of so much of any 
facility as is used or is to be used for sectarian instruction or as a 
place for religious worship.'' Therefore, if a building is used solely 
for sectarian instruction or as a place for religious worship, FWSP 
employment may not include the construction, operation, or maintenance 
of that building. For large, multi-use structures, however, FWSP 
employment may include the construction, operation, or maintenance of 
that building.
    While neither the statute nor the current regulations define the 
term ``sectarian instruction,'' the Department follows a similar 
definition to that set forth in a published opinion by the Department 
of Justice's Office of Legal Counsel. See Religious Restrictions on 
Capital Financing for Historically Black Colleges and Universities, 
2019 WL

[[Page 49805]]

4565486 O.L.C. at 18. In its opinion, the Office of Legal Counsel 
defined the word ``sectarian'' in the phrase ``sectarian activities'' 
to mean ``devotional activities.'' Id. According to Black's Law 
Dictionary, sectarian instruction would ordinarily be defined as 
instruction that ``supports a particular religious group and its 
beliefs,'' 1557 (10th ed. 2014), and Webster's Third would define it as 
instruction that has ``the characteristics of one or more sects of a 
religious character,'' Webster's Third New International Dictionary 
2052 (2002). Thus, instruction that is predominately devotional and 
religious is ``sectarian instruction.'' Sectarian instruction would 
include instruction such as Christian or Jewish homilies or Islamic 
khutbahs. Instruction related to the provision of generally secular 
services does not constitute sectarian instruction, including various 
types of counseling or educational instruction that may include some 
sectarian or religious content but that is not predominately religious 
or devotional in nature. Individuals or organizations may integrate 
religious ideas or teachings into otherwise secular instruction without 
engaging in sectarian instruction.
    The Department concludes that this reading of the restriction is 
independently justified in light of the canon of constitutional 
avoidance. See, e.g., Clark v. Martinez, 543 U.S. 371, 381-82 (2005). A 
broad reading of the restriction could potentially cover all buildings 
where instruction takes place at a religious institution, potentially 
converting the restriction from a use-based restriction into the kind 
of status based restriction expressly prohibited in Trinity Lutheran, 
137 S. Ct. at 2023. In order to avoid this potential Free Exercise 
Clause problem, the Department construes the restriction narrowly to 
only cover instruction that is predominately devotional and religious.
    In addition, the Department's interpretation of ``sectarian 
instruction'' is independently supported by RFRA. A broad reading of 
the restriction could cover all buildings where instruction takes place 
at a religious institution, potentially forcing the institution to 
choose between participation in the FWSP and continuing in its 
religious exercise. This would place a substantial burden on such 
institutions' exercise of religion without advancing any compelling 
government interest by the least restrictive means and would therefore 
run counter to RFRA. See, e.g., Hobby Lobby Stores, Inc. v. Sebelius, 
723 F.3d 1114, 1141 (10th Cir. 2013) (en banc), aff'd sub nom. Burwell 
v. Hobby Lobby Stores, Inc., 573 U.S. 682 (2014). A denial of, or 
condition on the receipt of, government benefits may substantially 
burden the exercise of religion if such denial or condition exerts 
significant pressure on an adherent to modify his or her religious 
observance or practice. See U.S. Att'y Gen. Memorandum on Federal Law 
Protections for Religious Liberty (Oct. 6, 2017); Sherbert v. Verner, 
374 U.S. 398, 405-06 (1963); Hobbie v. Unemployment Appeals Comm'n of 
Fla., 480 U.S. 136, 141 (1987); Thomas v. Review Board of Indiana 
Employment Security Div., 450 U.S. 707, 717-18 (1981). And for the 
reasons explained above, such a broad restriction would neither be 
required by the Establishment Clause, nor justified by a compelling 
governmental interest. A narrower reading of ``sectarian instruction'' 
avoids these problems and, thus, would appear to be more consistent 
with congressional intent to impose this restriction without exempting 
it from RFRA.
    Changes: The Department amends the proposed regulation to specify 
the narrow definition of sectarian instruction and to include the 
exception for situations involving a substantial burden on a person's 
exercise of religion under RFRA.

Deferment (Sec.  682.210)

    Comments: In response to a directed question in the NPRM, the 
Department received several comments stating that in order to provide 
consistent treatment of deferments across loan programs, we should 
remove Sec.  682.210(m)(1)(iv), which states that certain FFEL loans 
cannot be deferred for volunteer work unless the borrower ``does not as 
part of his or her duties give religious instruction, conduct worship 
services, engage in religious proselytizing, or engage in fund-raising 
to support religious activities.'' Commenters indicated that it would 
be unfair and inconsistent to treat eligibility for loan deferment 
under the FFEL program differently than under the Perkins and NDSL 
programs.
    Discussion: The Department agrees with commenters that there should 
be consistent treatment of loan deferments across loan programs.
    Changes: The Department has removed Sec.  682.210(m)(1)(iv).

Public Service Loan Forgiveness Program (Sec.  685.219)

    Comments: The Department received many comments on the proposed 
changes to Sec.  685.219 relating to the PSLF program. In particular, 
commenters were concerned about proposed Sec.  685.219(c)(4), which 
would provide that time spent participating in religious instruction, 
worship services, or any form of proselytizing while employed by a non-
profit organization under section 501(c)(3) of the Internal Revenue 
Code would not be included toward meeting the full-time requirement.
    Many commenters asserted that both the original regulatory language 
and the proposed change violate RFRA, because the regulations force 
borrowers to choose between exercising their religion and obtaining a 
meaningful government benefit. Also, commenters stated that the 
proposed regulations would unlawfully continue to exclude those who are 
participating in religious exercise and speech from qualifying for the 
generally available benefit of loan forgiveness. Commenters believed 
that, under the proposed rules, borrowers could be compelled to work 
for secular organizations over religious organizations in order to 
obtain loan forgiveness. From a practical perspective, commenters noted 
that religious activities may be intertwined with secular work, making 
it difficult to clearly separate out the hours and creating uncertainty 
and confusion on the part of the applicants and employing 
organizations. These commenters indicated that religious activities 
should not be excluded in the calculation of work hours for PSLF.
    Some commenters stated that the Establishment Clause does not 
require borrowers eligible for loan forgiveness to exclude religious 
activities from their full-time work hours. Commenters also contended 
that the proposed provision would raise a significant threat of 
entanglement under the Establishment Clause when the government tries 
to evaluate whether a religious organization's employees are properly 
defining work that touches on religious education or worship.
    Further, commenters asserted that because the proposed language is 
not the least restrictive means of advancing any government interest, 
the language also violates RFRA.
    One commenter also raised concerns that the terms ``religious 
instruction,'' ``worship services,'' and ``proselytizing'' are not 
defined and are not workable. For example, the commenter argued that 
worship cannot be separated from the teaching of moral values, and that 
it is not clear whether proselytizing includes secular viewpoints. The 
commenter stated that use of these terms has the effect of excluding 
people engaged in religious speech. The commenter argued

[[Page 49806]]

that it would be more appropriate to treat all applicants for PSLF 
equally.
    Other commenters expressed concern that it would violate the 
Establishment Clause if borrowers received loan forgiveness to work on 
inherently religious activities. One commenter argued that the 
Department's justification for this proposal misinterprets the decision 
in Trinity Lutheran and that RFRA does not apply to this situation in 
which the Government is not preventing the borrower from performing the 
desired religious activities and does not deny benefits to religious 
persons engaging in qualified work. These commenters urged the 
Department to maintain the proposed language as published in the NPRM.
    Commenters stated that using RFRA to create a religious exemption 
for PSLF work requirements is at odds with the tailored approach 
required by RFRA, and that RFRA does not give the Department authority 
to adjudicate claims it anticipates might happen and create blanket 
exemptions. Instead, RFRA requires a ``careful, individualized, and 
searching review.''
    Many commenters encouraged the Department to adopt the proposed 
language or to maintain the current regulatory language.
    Discussion: The Department is persuaded that the proposed 
regulations requiring borrowers to exclude work spent on religious 
activities from full-time work is not required by the Establishment 
Clause and may pose unnecessary burdens. The Establishment Clause does 
not require that borrowers work solely for secular organizations to 
obtain loan forgiveness.\11\
---------------------------------------------------------------------------

    \11\ Zelman v. Simmons-Harris, 536 U.S. 639, 652 (2002); 
Mitchell v. Helms, 530 U.S. 793, 829 (2000); Rosenberger v. Rector & 
Visitors of Univ. of Virginia, 515 U.S. 819, 839 (1995); Everson v. 
Bd. of Ed. of Ewing Twp., 330 U.S. 1, 17 (1947).
---------------------------------------------------------------------------

    The Department also recognizes that there are practical 
difficulties associated with separating religious work from public 
service work, as the two may not always be cleanly divided. There would 
be burdens on both the borrowers in attempting to record the different 
time spent on religious activities and on the Department in overseeing 
such a restriction. Moreover, concerns about potentially overbroad 
interpretations of the religious activities that could not count toward 
full-time work could dissuade borrowers from working for religious 
organizations or pressure them to forgo the economic benefits that flow 
from loan forgiveness. And to the extent that the proposed language was 
interpreted broadly to disqualify from loan forgiveness individuals who 
hold particular views about the religious nature of their public 
service--for example, those who view their service as a form of 
proselytization even if it contains no explicit call to conversion--
would raise Free Exercise or RFRA concerns. As a result, the Department 
has not included proposed Sec.  685.219(c)(4) in the final regulations. 
The final regulations will set religious individuals and entities on 
equal footing with their secular counterparts by allowing such 
individuals and entities to qualify for the same aid already available 
to nonreligious individuals and entities.
    The Department does not agree with commenters who argued that RFRA 
is not implicated by the Department's current rules excluding religious 
individuals and entities from participation in generally available 
benefit programs. Nor does the Department agree with commenters who 
argued that the Department is using RFRA to create overly broad, 
blanket exceptions. The rule is designed to both correct existing RFRA 
violations under the current regulations and to prevent future 
violations. Congress has tasked the Department with the duty to ensure 
that the Department's regulations do not substantially burden a 
person's exercise of religion (absent a compelling government interest 
and a showing that the burden is the least restrictive means of 
furthering that interest). 42 U.S.C. 2000bb, et seq. This mandate, as 
previously discussed, applies to ``all Federal law, and the 
implementation of that law, whether statutory or otherwise.'' 42 U.S.C. 
2000bb-3(a). Thus, the Department's establishment of this regulation 
clearly falls under the mandate of RFRA.
    Because the current regulations discriminate against religious 
groups and deny individuals the ability to participate in important 
government programs on the basis of their religious status, the current 
regulations likely amount to a substantial burden on those entities' 
exercise of religion.
    RFRA defines ``religious exercise'' as ``any exercise of religion, 
whether or not compelled by, or central to, a system of religious 
belief.'' 42 U.S.C. 2000bb-2(4) (citing 42 U.S.C. 2000cc-5). The 
current rules impose a ``penalty'' on these individuals' free exercise 
of religion, Trinity Lutheran, 137 S. Ct. at 2021--which they engage in 
by becoming members of religious orders, attending religious 
institutions, participating in or working at religious organizations, 
among other ways--by requiring them to ``choose between their religious 
beliefs and receiving a government benefit.'' Id. at 2023 (quoting 
Locke, 540 U.S. at 720-21); see Sherbert v. Verner, 374 U.S. 398, 404 
(1963) (finding a substantial burden where it was ``apparent that 
appellant's declared ineligibility for benefits derives solely from the 
practice of her religion,'' forcing her ``to choose between following 
the precepts of her religion and forfeiting benefits, on the one hand, 
and abandoning one of the precepts of her religion in order to accept 
work, on the other hand''); see also 42 U.S.C. 2000bb(b)(1) (``The 
purposes of this chapter are--(1) to restore the compelling interest 
test as set forth in Sherbert v. Verner, 374 U.S. 398 (1963) and 
Wisconsin v. Yoder, 406 U.S. 205 (1972) and to guarantee its 
application in all cases where free exercise of religion is 
substantially burdened . . . .'').
    And the Department's status-based restrictions are neither 
necessary to further a compelling government interest, nor are they the 
least restrictive means of furthering any such interest. Therefore, 
RFRA would require the Department to alleviate any such substantial 
burden.
    Some commenters believe that the Department's changes to 
eligibility requirements for certain aid would have the effect of 
advancing religion. The Department's aid will not advance religion, nor 
do the Department's changes require aid to be used for religious 
purposes. Rather, the Department's aid will advance public service 
generally, by eliminating a condition on eligibility for loan 
forgiveness that might have deterred individuals from performing such 
volunteer work, and it will accommodate the religious exercise of those 
who seek to perform volunteer work for a religious organization. 
Importantly, the Department's final regulations correct rules that 
singled out individuals employed by organizations that are engaged in 
religious activities for disfavored treatment.
    Additionally, the Supreme Court has repudiated the suggestion, 
advanced by some commenters, that the Establishment Clause bars 
government aid from flowing from religiously neutral government 
programs to religious institutions. See, e.g., Mitchell v. Helms, 530 
U.S. 793, 835 (plurality opinion) (overruling Wolman v. Walter, 433 
U.S. 229 (1977) and Meek v. Pittenger, 421 U.S. 349 (1975)); id. at 837 
(O'Connor, J., concurring in the judgment) (same); Agostini v. Felton, 
521 U.S. 203, 235 (overruling Aguilar v. Felton, 473 U.S. 402 (1985) 
and School District of the City of Grand Rapids v. Ball, 473 U.S. 373 
(1985)).

[[Page 49807]]

    In addition, under the principle set forth in Zelman, a benefit 
program like PSLF need not exclude religious recipients to comply with 
the Establishment Clause where funding would only reach such recipients 
following the private choice of the individual using the benefit. See 
Zelman, 536 U.S. 639, 653-60 (2002). Likewise, in this case, the 
borrower receiving the benefit of PSLF under the regulation makes a 
private choice between different volunteer options in the community and 
does not create an Establishment Clause problem by choosing to 
volunteer with a religious entity that performs religious tasks. As a 
result of the intervening private choice of the borrower, ``no 
imprimatur of state approval can be deemed to have been conferred on 
any particular religion, or on religion generally.'' Zelman, 536 U.S. 
at 650 (internal citations, quotation marks omitted).
    Although the current regulations do not raise an Establishment 
Clause problem, they do raise a Free Exercise Clause concern. In 
Trinity Lutheran, the Court reiterated that the Free Exercise Clause 
applies to government benefits and funding. The Court in that case 
rejected the State's interest in ``skating as far as possible from 
religious establishment concerns'' as a basis for categorically 
excluding a religious organization from a generally available funding 
program. Id. at 2021. The Court applied ``the most exacting scrutiny'' 
to the government program, finding that it ``expressly 
discriminate[d]'' against an entity that would be otherwise eligible 
for the government grant but for that entity's religious character. Id.
    A materially similar fact pattern exists in the current 
regulations: But for the religious character of the public service 
organization that a borrower works for and the types of religious 
activities the organization performs, the borrower would have qualified 
for loan forgiveness under title IV. The benefit available under Sec.  
685.219 is generally available, except to borrowers who work for non-
profit organizations that are engaged in religious activities. Such an 
exclusion is based on the religious status of an organization and, 
therefore, is unconstitutional. Some commenters argue that the 
Department errs in relying on Trinity Lutheran. They contend that, 
according to footnote 3 in the decision, Trinity Lutheran applies only 
to the narrow factual circumstance of a church-run school seeking to 
compete for a playground resurfacing grant.
    As discussed above in the Department's response to general comments 
on Faith-Based Entities, footnote 3 does not undermine the force of the 
reasoning in Trinity Lutheran and was only joined by four Justices. 
Trinity Lutheran, 137 S. Ct. at 2016.
    Changes: The Department has removed proposed Sec.  685.219(c)(4), 
which would have prohibited PSLF applicants from counting hours spent 
on religious instruction, worship, proselytizing, and fund raising 
towards the full-time work requirement of the PSLF program.

How does a State administer its community service-learning job program? 
(Sec.  692.30)

    Comments: Several commenters indicated that they have the same 
concerns about the proposed changes to Sec.  692.30 relating to the 
LEAP program that they raised with respect to Sec.  675.20 relating to 
the FWSP.
    Discussion: See the discussion on Sec.  675.20 above.
    Changes: None.

Who may provide GEAR UP services to students attending private schools? 
(Sec.  694.6)

    Comments: All commenters who opined on Sec.  694.6 supported the 
Department's proposal with respect to the treatment of private schools 
in the GEAR UP program. Commenters indicated that the proposal provides 
additional clarification and retains important protections and 
guidelines for serving GEAR UP students in private schools. Commenters 
noted that the proposal retains the requirement that government funded 
services be ``secular, neutral, and nonideological'' and thus maintains 
boundaries required by the Establishment Clause.
    Discussion: The Department thanks commenters for their support.
    Changes: None.

What are the requirements that a Partnership must meet in designating a 
fiscal agent for its project under this program? (Sec.  694.10)

    Comments: Many commenters supported the proposed changes to Sec.  
694.10 to remove language prohibiting pervasively sectarian 
organizations from serving as fiscal agents in GEAR UP grants. Some 
noted that it is inappropriate for the government to make 
determinations as to whether an institution is pervasively sectarian. 
Others noted that the term ``pervasively sectarian'' is outdated and 
reflects an anti-religious bias. Commenters also noted that the 
proposed regulations reflect current case law regarding the 
Establishment Clause and the Free Exercise Clause. Others indicated 
that they support the proposed change in combination with the retention 
of the requirement that benefits provided to GEAR UP students must be 
``secular, neutral, and nonideological.''
    Discussion: The Department thanks commenters for their support.
    Changes: None.

Teach Grant Program

General Comments

    Comments: In general, commenters supported the proposed 
regulations. Commenters believed that, by simplifying the requirements, 
the proposed regulations would reduce the number of TEACH Grants 
inadvertently converted to Direct Unsubsidized Loans. They also felt 
that changes would be helpful for TEACH Grant recipients, including 
expanding and strengthening counseling and notification provisions, 
providing additional conditions under which the period for completing 
the teaching service obligation may be temporarily suspended, providing 
a reconsideration process for TEACH Grants inadvertently converted to 
loans, and expanding options for satisfying the teaching service 
obligation.
    Discussion: We thank the commenters for their support.
    Changes: None.
    Comments: Some commenters expressed concerns about servicer and 
institutional accountability regarding the administration of the TEACH 
Grant program and recommended that the Department impose liabilities 
and escalating consequences on servicers and institutions that fail to 
properly carry out their responsibilities.
    Discussion: We appreciate the commenters' concerns. However, these 
concerns are outside the scope of this regulatory effort. The 
Department holds servicers accountable through contractual agreements 
and can impose escalating consequences and even terminate a contract of 
a servicer that has failed to properly carry out its responsibilities. 
Institutions can only disburse TEACH Grants if they maintain 
institutional eligibility to disburse Federal student aid. One 
requirement for institutional eligibility is that an institution must 
satisfy standards of administrative capability. Failure to do so can 
result in termination of the institution's eligibility. In addition, we 
note that the Department's Federal Student Aid (FSA) office maintains a 
Feedback System, which includes a formal process for borrowers to 
report issues or file complaints about their loan experiences, 
including problems with servicing. Borrowers may also elevate 
complaints to the FSA Ombudsman Group--a neutral and confidential 
resource available to

[[Page 49808]]

borrowers to resolve disputes related to their loans.
    Changes: None.

Definitions (Sec.  686.2)

Highly Qualified

    Comments: A couple of commenters expressed concern that a reference 
to section 602(10) of the Individuals with Disabilities Education Act 
(IDEA) was removed from the definition of ``highly qualified.'' The 
commenters stated that this section should continue to be referenced in 
the ``highly qualified'' definition.
    Discussion: We agree with the commenters. The reference to section 
602(10) of the IDEA was inadvertently removed.
    Changes: We have restored the reference to section 602(10) of the 
IDEA.
    Comments: A couple of commenters stated their belief that it was 
inappropriate for the TEACH Grant Program regulations to use language 
from the teacher loan forgiveness provisions in sections 428J(g)(3) and 
460(g)(3) of the HEA to describe how private school teachers who are 
exempt from State certification requirements can meet the highly 
qualified teacher standards. The commenters noted that the TEACH Grant 
program is designed to incentivize highly qualified educators, who 
receive hundreds of hours of professionally supervised pre-service 
field experiences and undergo a comprehensive, standards-based 
curriculum to teach in the most underserved schools in the most 
undersupplied subject areas.
    Discussion: We disagree with the commenters. As we explained in the 
NPRM, teaching in an eligible non-profit private school can be 
qualifying service for purposes of satisfying the TEACH Grant service 
obligation, but the definition of ``highly qualified'' in the 
Elementary and Secondary Education Act (ESEA) does not address private 
school teachers. Therefore, we are expanding the definition of ``highly 
qualified'' to include the language from sections 428J(g)(3) and 
460(g)(3) of the HEA that describes how private school teachers who are 
exempt from State certification requirements can meet the highly-
qualified teacher standards for teacher loan forgiveness purposes. We 
believe it is appropriate to incorporate this language, since student 
loan borrowers seeking teacher loan forgiveness must meet the same 
highly qualified teacher standards that apply to TEACH Grant 
recipients.
    Changes: None.

Agreement To Serve or Repay (Sec.  686.12)

    Comments: A couple of commenters expressed concern with Sec.  
686.12 based on their belief that a TEACH Grant recipient who completes 
a TEACH Grant-eligible educator preparation program in the middle of 
the academic year will lose a full calendar year of the eight-year 
period for satisfying the service obligation because of the requirement 
that a teacher teach full-time for a full school year.
    Discussion: Under these conditions, a grant recipient who starts 
teaching mid-year would not lose a full calendar year of the eight-year 
period for completing the service obligation. The HEA requires that a 
grant recipient serve as a full-time teacher for a total of not less 
than four academic years within eight years after completing the course 
of study for which the TEACH grant was received. The current 
regulations, in part, define ``academic year or its equivalent for 
elementary and secondary schools (elementary or secondary academic 
year)'' to be one complete school year, or two complete and consecutive 
half-years from different school years, excluding summer sessions, that 
generally fall within a 12-month period. To clarify this in the 
regulations, in the NPRM we proposed to replace the reference to 
``eight calendar years'' with ``eight years''.
    Changes: None.
    Comments: A couple of commenters felt that the grace period for 
seeking qualifying employment should be extended to the earlier of--(1) 
one year from the date a recipient is no longer enrolled in a 
qualifying TEACH Grant program, or (2) the date the recipient begins 
qualifying employment in a TEACH-eligible school and subject area.
    Discussion: The regulations do not require a TEACH Grant recipient 
to begin qualifying teaching service within a certain timeframe after 
the recipient has ceased to be enrolled in the program of study for 
which he or she received a TEACH Grant. Rather, a grant recipient must 
begin and maintain qualifying teaching within a timeframe that will 
allow the recipient to complete the four-year service obligation within 
the eight-year service obligation period.
    Changes: None.

Counseling Requirements (Sec.  686.32)

    Comments: A couple of commenters disagreed with the policy 
reflected in the proposed regulations that prohibited the reversal of 
the conversion of a TEACH Grant to a loan if the grant recipient had 
requested the conversion. The commenters believed that the 
circumstances that led a grant recipient to request a conversion could 
later change such that the grant recipient may now want to teach and 
satisfy the service obligation. In such cases, the commenters felt that 
the grant recipient should be able to have the conversion reversed so 
that the recipient could teach and help address the nation's teacher 
shortages.
    Discussion: We agree that a grant recipient who previously 
requested conversion should be able to have the conversion reversed, so 
that the recipient could perform qualifying teaching to satisfy the 
TEACH Grant service obligation. This cannot be an open-ended 
opportunity, however. The grant recipient must still be able to fulfill 
the service obligation within eight years from when the recipient 
ceased enrollment at the institution where the recipient received the 
TEACH grant or, in the case of a student who received a TEACH Grant at 
one institution and subsequently transferred to another institution and 
enrolled in another TEACH Grant-eligible program, within eight years of 
ceasing enrollment at the other institution. The eight-year period for 
completing the required four years of teaching does not include periods 
of suspension, which the recipient could apply for retroactively, if 
applicable. However, the eight-year period will include the period when 
the grant was in loan status. If a grant recipient requests reversal of 
a prior voluntary conversion at a point when the recipient would no 
longer have enough time to complete the service obligation during the 
eight-year period unless he or she qualifies for a retroactive 
suspension, an application for suspension will need to be submitted and 
approved prior to reconversion. This option should be explained to the 
recipient during initial, subsequent, exit, and conversion counseling.
    Changes: We have added new Sec.  686.43(a)(8) to provide that, in 
the case of a grant recipient whose TEACH Grant was converted to a loan 
in accordance with Sec.  686.43(a)(1)(i), the Secretary will reconvert 
the loan to a TEACH Grant if requested by the grant recipient, and 
restore the recipient's TEACH Grant service obligation, if there is 
sufficient time remaining for the grant recipient to complete the 
required four academic years of qualifying teaching service within 
eight years from the date the grant recipient ceased enrollment at the 
institution where the recipient received the grant or, in the case of a 
student who received a TEACH Grant at one institution and subsequently 
transferred to another institution and enrolled in another TEACH Grant-
eligible program, within eight years of ceasing enrollment

[[Page 49809]]

at the other institution. New Sec.  686.43(a)(8) further states that 
the eight-year period for completing the required four years of 
teaching does not include periods of suspension for which the recipient 
qualifies under Sec.  686.41. It also provides that a period of 
suspension for which the recipient applies and is determined to be 
eligible may be applied retroactively. If the recipient would not have 
sufficient time remaining to complete the service obligation within the 
eight-year period the Secretary will not reconvert the recipient's loan 
to a TEACH Grant unless the recipient first requests and is determined 
to be eligible for a retroactive suspension.
    We have removed the language in the proposed regulations addressing 
the initial, subsequent, and exit counseling requirements which state 
that the conversion of a TEACH Grant to a loan cannot be reversed if 
the grant recipient requested the conversion, and have revised the 
regulations governing the initial, subsequent, and exit counseling 
requirements in Sec.  686.32(a), (b), and (c), respectively, and the 
new conversion counseling requirements in Sec.  686.32(e) by adding for 
each type of counseling a requirement that the counseling explain the 
terms and conditions under which a grant recipient who voluntarily 
requested conversion of a TEACH Grant to a loan under Sec.  
686.43(a)(1)(i) may subsequently request and be approved for a reversal 
of the conversion, as described above. We have also added new paragraph 
Sec.  686.12(b)(7) to provide that the contents of the agreement to 
serve or repay must include this same information.
    We believe that the expanded counseling reflected in these 
regulations will help reduce the number of grants that are converted to 
loans. We note, however, that, consistent with the rules relating to 
the Direct Loan Program, a recipient's failure to receive or read the 
counseling materials is not a basis for reconverting the loan to a 
grant.
    The proposed regulations describing the initial, subsequent, exit, 
and conversion counseling included language stating that the counseling 
must explain that a TEACH Grant that has been converted to a Direct 
Unsubsidized Loan may be reconverted to a grant if the Secretary 
determines that the grant was converted to a loan in error. For 
consistency with redesignated Sec.  686.43(a)(5), we have revised this 
language to state that a grant that was converted to a loan may also be 
reconverted to a grant based on documentation showing that the 
recipient was satisfying the service obligation within the required 
time frame.
    We have deleted Sec.  686.43(d), which stated that a TEACH Grant 
that is converted to a Federal Direct Unsubsidized Loan cannot be 
reconverted to a grant, consistent with the other changes to this 
section.
    Comments: A couple of commenters recommended that all types of 
TEACH Grant counseling should provide grant recipients with information 
about the options of income-driven repayment plans and public service 
loan forgiveness for those whose TEACH Grants are converted to loans.
    Discussion: In the NPRM, we proposed to provide information about 
income-driven repayment plans and public service loan forgiveness in 
the new conversion counseling for recipients whose grants are converted 
to loans. We do not believe it is necessary to include this information 
in initial, subsequent, or exit counseling, since the information is 
relevant only to recipients whose grants are being converted to loans.
    Changes: None.

Documenting the Service Obligation (Sec.  686.40)

    Comments: A couple of commenters expressed concern about removing 
the requirement for grant recipients to confirm their status within 120 
days of ceasing enrollment in a program for which they received a TEACH 
Grant. The commenters felt that by removing the requirement for initial 
certification, grant recipients would lose track of the requirement to 
certify their progress toward satisfying the service obligation in 
subsequent years, despite seeking to obtain, or even working, in 
qualifying employment. Other commenters supported the proposed changes 
that were intended to simplify the procedures for grant recipients to 
certify that they are meeting the required service obligation, and the 
provisions for the Secretary to provide periodic notifications to grant 
recipients reminding them of their service obligation requirements.
    Discussion: We continue to believe that the current 120-day 
certification requirement should be removed because it adds unnecessary 
complexity to the requirements for documenting the service obligation. 
That complexity may, in some cases, have resulted in grant recipients 
who were otherwise meeting the service obligation requirements having 
their grants converted to loans. Under Sec.  686.42(a)(2), at least 
annually during the service obligation period the Secretary will 
provide the grant recipient with information that includes the number 
of years of qualifying teaching that the recipient has completed and 
the remaining timeframe within which the grant recipient must complete 
the service obligation. We believe that these notifications will 
provide the information the grant recipient needs to stay on track to 
fulfill the service obligation.
    Changes: None.

Periods of Suspension (Sec.  686.41)

    Comments: A couple of commenters noted that there may be life 
circumstances that reasonably prohibit grant recipients from securing 
employment in eligible schools.
    Discussion: While we appreciate the commenters' concern, it would 
be difficult for the Department to determine all the life circumstances 
that might reasonably prohibit grant recipients from securing 
employment in eligible schools, and any such determination could be 
considered arbitrary. We note that, under new Sec.  686.41(d), the 
Secretary may provide temporary suspensions of the period for 
completing the service obligation on a case-by-case basis if the 
Secretary determines that a grant recipient was unable to complete a 
full academic year of teaching or begin the next academic year of 
teaching due to exceptional circumstances significantly affecting the 
operation of the school or educational service agency where the grant 
recipient was employed or the grant recipient's ability to teach.
    Changes: None.

Obligation To Repay the Grant (Sec.  686.43)

    Comments: None.
    Discussion: After further review of the NPRM, the Department 
recognizes that there was substantial overlap between proposed Sec.  
686.43(a)(5) and Sec.  686.43(a)(6) and that the latter section was not 
clear. Specifically, paragraph (a)(6) provided for reconversion of a 
grant that had been ``involuntarily'' converted (that is, a grant that 
had been converted for a reason other than a voluntary request for 
conversion from the grant recipient, which would include the 
circumstances described in paragraph (a)(5)), and it also provided for 
reconversion of a grant that had been ``improperly'' converted to a 
loan (that is, a grant that had been converted in error), based on 
documentation provided by the recipient or in the Department's records 
demonstrating that the recipient was satisfying the service obligation, 
or that the grant had been converted to a loan in error. The

[[Page 49810]]

Department has revised these sections to clarify the requirements.
    Changes: The Department has removed proposed Sec.  686.43(a)(5), 
redesignated paragraph (a)(6) as (a)(5), revised redesignated paragraph 
(a)(5) for greater clarity, and renumbered the remaining paragraphs in 
Sec.  686.43(a).
    Comments: Some commenters felt that, to strengthen the 
effectiveness of provisions regarding incorrect grant-to-loan 
conversions, the Department should automatically provide any recipient 
with a written ``statement of error'' when a grant that was incorrectly 
converted is reconverted to a TEACH Grant. Under the proposed 
regulations, this statement of error would have been provided at the 
recipient's request.
    Discussion: We agree with the commenters. Automatically providing 
the grant recipient with a written statement confirming that the TEACH 
Grant had been converted to a loan in error when the loan is 
reconverted to a TEACH grant would ensure that the grant recipient has 
documentation that the Department determined that the conversion was 
incorrect without further inconveniencing the affected individual.
    Changes: Proposed Sec.  686.43(a)(7)(iv), which stated that a 
statement of error would be provided to a grant recipient at the 
recipient's request, has been redesignated as Sec.  686.43(a)(6)(vi) 
and revised to provide that the Secretary will automatically send a 
statement of error to the recipient when a TEACH Grant that was 
converted to a loan in error is reconverted to a TEACH Grant.
    Comments: Some commenters believed that there should be a 
formalized process for a TEACH Grant recipient to request 
reconsideration of other adverse actions that impact the recipient's 
ability to complete the service obligation, stating that grant 
recipients should have the opportunity to request reconsideration by 
the Secretary of any adverse action taken against them by the Secretary 
in connection with the servicing of their grant. Such adverse actions 
would include, but would not be limited to, the rejection of a 
certification of teaching service, a determination that the recipient's 
employment does not meet the service obligation requirements, or a 
denial of a request for suspension or discharge. The commenters 
recommended that if the Secretary determines that the adverse action 
was taken in error, the Secretary should reverse the adverse action and 
take all other actions necessary to correct the adverse action. The 
commenters believed that implementing this type of process would likely 
result in fewer erroneous grant-to-loan conversions resulting from 
wrongfully rejected certifications or other types of erroneous actions.
    Discussion: We are not aware of widespread problems involving 
``wrongful'' rejections of certifications or other erroneous actions 
such as those cited by the commenters. The Department rejects a 
certification form or a suspension/discharge request if information 
needed to confirm the qualifying service or approve the suspension/
discharge is missing, or if the information provided on the 
certification or the suspension/discharge request does not confirm 
qualifying service or establish eligibility for the suspension/
discharge (e.g., if the dates of teaching are missing or incomplete, or 
if the school listed on the certification form is not listed in the 
Teacher Cancellation Low Income Directory). These situations are 
generally resolved by the recipient providing the missing or additional 
information. If information is missing, a letter is sent to the 
recipient explaining what information the recipient needs to submit so 
the certification or request can be processed. If the information 
provided does not confirm that the individual has performed qualifying 
service or does not support the recipient's eligibility for suspension/
discharge, the recipient receives a letter explaining the reason for 
the rejection and has an opportunity to provide information documenting 
the qualifying service or suspension/discharge eligibility. In 
addition, if recipients continue to disagree with the decision, they 
may contact the Department's Federal Student Aid Ombudsman's office to 
try to resolve the issue. Thus, we do not believe it is necessary to 
establish a formalized process for grant recipients to request 
reconsideration of actions such as rejections of certification forms or 
denials of suspension or discharge requests. Processes are already in 
place for recipients to be notified of any problems with a 
certification form or suspension/discharge request, and to provide an 
opportunity for the recipient to submit corrected or missing 
information. We further note that the simplified requirements for 
documenting the service obligation in these final regulations should 
significantly reduce the number of grant-to-loan conversions.
    Changes: None.

Directed Questions

    Comments: In response to the directed questions that were included 
in the NPRM, a commenter supported the suggestion that a student's 
service obligation period be extended by the number of years their 
TEACH grants were incorrectly in loan status, regardless of whether the 
student completed one or more years of qualifying service during the 
period during which the grant was treated as a loan as described in the 
first directed question, or did not complete any qualifying service 
during the erroneous conversion period as described in the second 
directed question. The commenter felt that, in either scenario, the 
TEACH recipient may have left qualifying service at some point after 
the grant-to-loan conversion. The commenter further stated that re-
entering qualifying service is not a simple undertaking, noting that 
grant recipients may have relocated to an area without qualifying 
service positions or made other life choices that would hinder their 
ability to immediately re-enter a qualifying position. The commenter 
felt that extending the timeframe for completing the service obligation 
would give these individuals sufficient time to find qualifying 
positions to establish their eligibility for TEACH grants with minimal 
disruption to their lives and would mitigate the harm they have already 
suffered from the erroneous grant-to-loan conversion.
    Discussion: We agree with the commenter that the eight-year service 
obligation period should not include the period of time that the TEACH 
Grant was incorrectly in loan status, and that individuals whose grants 
were converted to loans in error may have stopped teaching because they 
believed that they would no longer receive credit for their service or 
for other reasons, and that after the erroneous conversion has been 
corrected it may take a significant period of time for these recipients 
to find qualifying teaching positions. However, because it provides 
more time for a recipient to find qualifying employment and to complete 
the teaching service obligation, we believe it would be more 
appropriate to adopt the alternative approach described in the directed 
question scenarios. That is, after the correction of the erroneous 
conversion we would provide the grant recipient with an additional 
period of time, equal to eight years minus the number of full academic 
years of qualifying teaching that the recipient had completed prior to 
the reconversion of the recipient's loan to a TEACH Grant (including 
any years of qualifying teaching that the recipient completed during 
the period when the grant was incorrectly in loan status), to complete 
the remaining portion of the service

[[Page 49811]]

obligation. This approach is illustrated by Example 1 below.
Example 1
     A grant recipient completes the program for which he or 
she received a TEACH Grant and enters the service obligation period.
     The recipient receives no suspensions and does not begin 
qualifying teaching until the start of the fifth year of the eight-year 
service obligation period.
     The recipient completes two academic years of qualifying 
teaching during the fifth and sixth years of the eight-year service 
obligation period. At the beginning of the seventh year of the service 
obligation period, the recipient's TEACH Grant is converted to a loan 
in error and remains incorrectly in loan status for three years.
     During the period when the grant is incorrectly in loan 
status, the recipient completes one additional academic year of 
qualifying teaching service.
     After the erroneous conversion is reversed and the 
recipient's loan is reconverted to a TEACH Grant, the three years of 
completed service (including the year of teaching completed while the 
grant was incorrectly in loan status) is subtracted from eight years, 
giving the recipient an additional five years following the correction 
of the erroneous conversion to complete the remaining one year of 
teaching required under the service obligation.
    In contrast to the approach described in the directed question and 
illustrated by the above example, under the proposed regulations the 
grant recipient in Example 1 would have had only two years following 
the correction of the erroneous conversion to complete the remaining 
one year of the service obligation.
    Changes: We have redesignated proposed Sec.  686.43(a)(7) as Sec.  
686.43(a)(6), and now address this issue in Sec.  686.43(a)(6)(ii) and 
(iii), which provide that after the Secretary reconverts an incorrectly 
converted loan to a TEACH Grant, the Secretary (1) applies any full 
academic years of qualifying teaching that the recipient completed 
during the period when the grant was incorrectly in loan status toward 
the grant recipient's four-year service obligation requirement, and (2) 
provides the recipient with an additional period of time to complete 
the remaining portion of the service obligation equal to eight years, 
minus the number of full academic years of qualifying teaching that the 
recipient completed prior to the correction of the erroneous 
conversion.

Executive Orders 12866, 13563, and 13771

Regulatory Impact Analysis

    Under Executive Order 12866, the Office of Management and Budget 
(OMB) must determine whether this regulatory action is ``significant'' 
and, therefore, subject to the requirements of the Executive order and 
subject to review by OMB. Section 3(f) of Executive Order 12866 defines 
a ``significant regulatory action'' as an action likely to result in a 
rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
Tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in the 
Executive order.
    Under Executive Order 12866, section 3(f)(1), the changes proposed 
in this regulatory action would materially alter the rights and 
obligations of recipients of Federal financial assistance under title 
IV of the HEA. Therefore, OMB has determined that this is a significant 
regulatory action subject to review by OMB.
    Under Executive Order 13771, for each new regulation that the 
Department proposes for notice and comment or otherwise promulgates 
that is a significant regulatory action under Executive Order 12866 and 
that imposes total costs greater than zero, it must identify two 
deregulatory actions. For FY 2020, any new incremental costs associated 
with a new regulation must be fully offset by the elimination of 
existing costs through deregulatory actions. The final regulations are 
a significant regulatory action under Executive Order 12866. However, 
Executive Order 13771 does not apply to ``transfer rules'' that cause 
only income transfers between taxpayers and program beneficiaries. 
Because the portion of the regulatory changes relating to the TEACH 
Grant Program and PSLF are a transfer rule and the remaining proposed 
regulatory changes impose minimal estimated costs of approximately 
$1.27 million in annualized net PRA costs at a 7 percent discount rate, 
discounted to a 2016 equivalent, over a perpetual time horizon, the 
requirement to offset new regulations in Executive Order 13771 does not 
apply to this final regulation. Accordingly, the Department is not 
required to identify deregulatory actions under Executive Order 13771.
    We have also reviewed these final regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only on a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things and to the extent practicable--the costs of 
cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We are issuing these final regulations only on a reasoned 
determination that their benefits justify their costs. Based on the 
analysis that follows, the Department believes that these regulations 
are consistent with the principles in Executive Order 13563.
    We also have determined that this regulatory action does not unduly 
interfere with State, local, or Tribal

[[Page 49812]]

governments in the exercise of their governmental functions.
    In this regulatory impact analysis, we discuss the need for 
regulatory action, the potential costs and benefits, assumptions, 
limitations, and data sources, as well as regulatory alternatives we 
considered.

Need for Regulatory Action

    In 2007, Congress established the Teacher Education Assistance for 
College and Higher Education (TEACH) Grant Program to increase the 
number of teachers in high-need fields in low-income schools. In 
exchange for receiving a TEACH Grant, recipients agree to teach in a 
high-need field \12\ such as reading, mathematics, or science, at a 
low-income school for at least four years in an eight-year period and 
annually certify that they intend to meet this requirement. If a 
recipient does not meet the grant requirements or the annual 
certification requirements, the grant converts to a Federal Direct 
Unsubsidized Loan with interest charged from the date of each TEACH 
Grant disbursement.
---------------------------------------------------------------------------

    \12\ Section 420N(b)(1)(C) of the HEA describes high-need fields 
as mathematics, science, foreign languages, bilingual education, 
special education, reading specialist, or another field documented 
as high-need by the Federal Government, State government, or LEA, 
and approved by the Secretary.
---------------------------------------------------------------------------

    A 2015 Government Accountability Office (GAO) report found that 
around 36,000 out of more than 112,000 TEACH Grant recipients had not 
fulfilled TEACH Grant requirements and had their grants converted to 
loans (GAO, 2015).\13\ GAO concluded that the Department needs to 
explore ways to increase awareness among students of how the TEACH 
Grant program operates and improve program management, especially with 
respect to the grant-to-loan conversion dispute process. GAO further 
noted that the Department should take steps to understand why teachers 
often do not meet the TEACH program requirements. GAO reiterated that 
the goal of reducing grant-to-loan conversions and increasing program 
completion should help drive the Department's efforts. GAO cited 
inconsistent and confusing external guidance regarding grant to loan 
conversions and the dispute process available to recipients as a 
failure of ``Federal internal control standards that highlight 
effective external communication.'' The revised regulations help to 
address GAO's concerns by improving the administration of the program 
and providing clearer information to recipients earlier in their 
service to prevent future problems, and more thoroughly explaining the 
dispute process if issues do arise.
---------------------------------------------------------------------------

    \13\ Government Accountability Office. (2015). Higher Education: 
Better Management of Federal Grant and Loan Forgiveness Programs for 
Teachers Needed to Improve Participant Outcomes (GAO 15-314). 
Washington, DC: United States Government Accountability Office.
---------------------------------------------------------------------------

    A 2018 study conducted for the Department by the American 
Institutes for Research (U.S. Department of Education, 2018) \14\ found 
that as of June 2016, 63 percent of TEACH Grant recipients who started 
their eight-year service obligation period before July 2014 had their 
grants converted to Unsubsidized Loans because they did not meet the 
service obligation requirements or the annual certification 
requirements. For instance, the study reported that 39 percent of 
recipients who were in loan status cited teaching in a position that 
did not qualify for TEACH Grant service and 33 percent cited not 
working as a certified teacher. Thirty-two percent said they did not 
understand the service requirements. Other factors related to teachers 
having grants converted to loans included not knowing about annual 
certification (19 percent), challenges related to the certification 
process (13 percent), forgetting about annual certification (9 percent) 
and other factors made up 24 percent, such as recipients who were never 
certain of their intention to teach or who changed their employment to 
a nonteaching position prior to meeting their service obligation.
---------------------------------------------------------------------------

    \14\ U.S. Department of Education. (2018). Study of the Teacher 
Education Assistance for College and Higher Education (TEACH) 
Program. Respondents could select more than one option.
---------------------------------------------------------------------------

    To address the concerns raised by these studies, we are changing 
the regulations to facilitate the process of documenting satisfaction 
of the service obligation requirements and ensure that recipients who 
fulfill their service obligation receive credit for it. Additionally, 
these regulations create a process to remediate conversions caused by 
life events (including on a case-by-case basis as determined by the 
Secretary) or administrative error to facilitate the completion of 
service obligation requirements for those who seek to do so. This will 
help reduce the percentage of TEACH Grants that erroneously convert to 
Direct Unsubsidized Loans and fulfill the TEACH Grant Program's 
intended outcomes.
    The regulations also ensure that faith-based entities, students who 
are members of religious orders, and borrowers fulfilling service 
obligations are not further burdened by their religious beliefs, and 
instead have equal access to broadly available programs and government 
funding. In response to the Supreme Court's decision in Trinity 
Lutheran and Executive Order 13798 (U.S. Attorney General Memorandum on 
Federal Law Protections for Religious Liberty (October 6, 2017)), the 
Department engaged in a full review of its regulations related to title 
IV, HEA programs in order to identify provisions that may discriminate 
against otherwise eligible students and faith-based entities by 
disqualifying them from title IV, HEA programs due to their religious 
beliefs in violation of the Free Exercise Clause of the First Amendment 
to the United States Constitution (Free Exercise Clause). The 
Department proposes to make changes to regulatory provisions that may 
discriminate against students or faith-based entities as a result of 
their religious beliefs to ensure compliance with the Free Exercise 
Clause.

Discussion of Costs, Benefits and Transfers

    The Department has analyzed the costs and benefits of complying 
with these final regulations and our estimates are a function of the 
uncertainty and limitations of relevant data. As discussed below, we 
believe that these final regulations will result in modest transfers 
from the Federal government and will benefit recipients of support 
under the affected programs.

Benefits of the Final Regulations

    With respect to the TEACH Grant Program, we anticipate that by 
simplifying and clarifying certification procedures and providing 
greater flexibility to recipients to meet their service obligation, the 
final regulations will result in a decrease in the number of TEACH 
Grant recipients that have their grants converted to loans. We further 
anticipate that this outcome and the expansion of opportunities that 
students can use to fulfill the service obligation will result in more 
teachers teaching in high-need fields at low-income schools as well as 
in authorized teacher shortage areas.
    The final regulations related to other programs will also reduce 
the potential for discrimination against students and faith-based 
institutions due to their religious beliefs in violation of the Free 
Exercise Clause.

Net Budget Impacts

    Regarding changes to the TEACH Grant Program, the changes improve 
the reporting and documentation process for grant recipients and could 
lead to a reduction in the number of grant-to-loan conversions. 
According to Department

[[Page 49813]]

data, the percentage of TEACH Grant recipients demonstrating effort to 
fulfill their service requirement by performing one or more years of 
qualified teaching service after six or more years following their last 
TEACH award has been increasing steadily. The improvements to the 
process for recipients to document their teaching service included in 
these final regulations will help prevent or resolve unintended grant 
to loan conversions.
    For FY 2020, The Department estimates that approximately 32,000 
recipients will receive $92 million in TEACH Grants with an average 
award of slightly over $3,000. Over the past five years from fiscal 
year 2014 through fiscal year 2019, the Department has provided a total 
of $524.6 million in TEACH grant funding to 190,686 students. Based on 
program data through FY 2019, the Department estimates that 64 percent 
of students receiving TEACH Grants will fail to complete their required 
service commitment and will have their grants converted to Direct 
Unsubsidized Stafford Loans.
    Using a sensitivity analysis of grant-to-loan conversions, we 
estimate that for the 2020 cohort, a one percentage point reduction in 
the grant-to-loan conversion would result in a transfer from the 
Federal Government of $727,034, since each grant that is not converted 
to a loan where the student is obligated to pay it back remains a 
grant. The Department recognizes that the percentage change that the 
final regulations would have on the percentage of conversions is 
uncertain. The Department intends that these regulatory changes will 
reduce the loan conversion rate. However, students fail to meet the 
TEACH Grant service requirements for many reasons, including teaching 
in positions that do not qualify or changing to non-teaching 
employment. For instance, the PPSS/AIR study cited earlier reported 
that approximately 39 percent of TEACH recipients whose grants had been 
converted to loans reported teaching in a position that did not qualify 
for the TEACH program, 33 percent reported not teaching or not 
completing the teaching certificate program, 32 percent stated they did 
not understand the service requirements, and about 44 percent of 
respondents reported factors related to the annual certification 
process as influencing them to not complete the program requirements. 
Since respondents could select more than one response category, the 
total percentage does not add to 100 percent. Of those that indicated 
the annual certification process was a problem, the distribution 
revealed that about 19 percent said they did not know about the annual 
certification process; 13 percent reported not certifying because of 
challenges to the certification process; 9 percent reported not 
certifying because they forgot, and about 2 percent listed other 
reasons.
    While predicting how recipients might change their behavior due to 
the final regulations is speculative, the PPSS/AIR responses give us 
reason to assume that there will be improvement based on the recipients 
who cited the certification process as a factor in their conversion. 
Such improvement would logically lead to some reduction in the grant-
to-loan conversion rate.
    Given an estimated grant-to-loan conversion rate, it is possible to 
identify a series of transfers for a series of percentage reductions 
that give context to the potential impact that the proposed regulations 
would have.

     Five Percentage Point Interval Grant-to-Loan Conversion Impacts
------------------------------------------------------------------------
                                                                 Cost
               Percentage point reduction (%)                ($millions)
------------------------------------------------------------------------
5..........................................................          3.6
10.........................................................          7.3
15.........................................................         10.9
20.........................................................         14.6
25.........................................................         18.2
------------------------------------------------------------------------

    The above table suggests that if the grant-to-loan conversion rate 
were reduced from the estimated 64 percent to 59 percent--a five 
percentage point reduction--the Federal Government would incur 
additional transfers of approximately $3.6 million based on the 2020 
cohort. And, if the projected 64 percent rate were reduced by 10 
percentage points to 54 percent for the same 2020 cohort, there would 
be a cost of about $7.3 million. However, this transfer from the 
Federal Government would also result in a benefit to student TEACH 
Grant recipients who would not have to repay their TEACH Grants which 
would not be converted to loans. Note that these are five percentage 
percentage-point intervals, and not percentage decreases of the current 
rate.
    Currently, a TEACH Grant recipient may not satisfy the service 
obligation by teaching in a geographic region of a State that has been 
designated in the Nationwide List (at https://tsa.ed.gov) as having a 
shortage of teachers, or by teaching at a particular grade level not 
associated with a high-need field that has been designated in the 
Nationwide List as having a shortage of teachers. Instead, the 
recipient must teach in a high-need field listed in the Nationwide 
List.
    The final regulations remove this limitation. For example, under 
the final regulations, a grant recipient could satisfy the service 
obligation by serving as a full-time highly qualified general 
elementary school or secondary school teacher at a low-income school in 
a State that has reported a general shortage of elementary or secondary 
teachers in the Nationwide List. This is not currently allowed. 
Therefore, the final regulations allow grant recipients who are unable 
to find qualifying teaching jobs in a high-need field to meet the 
service obligation by teaching at a low-income school located in a 
geographic teacher shortage area or at a grade level where there is a 
shortage of teachers. This could facilitate increased opportunities for 
TEACH recipients toward meeting the service obligation and perhaps 
impact the conversion rate to loans. More importantly, it could serve 
as an important incentive to attract highly qualified teachers to serve 
in higher need areas and fields. It would be speculative to assume any 
specific amount of change in the conversion rate attributable to 
potential expanded teaching opportunities. Also, the proposed change 
might result in some grant recipients simply transferring from one low-
income school to another low-income school to accept a teaching 
position that might previously have not been eligible.
    Based on available data from the Department's Teacher Shortage Area 
listing,\15\ there are about 10 States, including California, Idaho, 
Illinois, Maine, Michigan, North Dakota, South Dakota, Pennsylvania, 
Virginia, West Virginia, and the District of Columbia, that appear to 
have teacher shortages, particularly in the elementary education area, 
that could potentially expand the eligible teaching opportunities for 
TEACH Grant recipients. According to National Center for Education 
Statistics data, these States represented approximately 27 percent of 
teachers in public elementary and secondary schools in the 2011-12 
Schools and Staffing Survey data, both for overall teachers and for 
those in their first 10 years of teaching.\16\ As indicated in the 
PPSS/AIR responses, approximately 15

[[Page 49814]]

percent of those respondents whose grants converted to loans said they 
were unable to find a job in a high-need field and, adjusting for the 
nationwide percentage of public schools with 30 percent or more of 
students receiving a free and reduced lunch of approximately 70 
percent,\17\ we estimate that the changes removing the high needs field 
requirement in qualifying States will reduce the overall grant-to-loan 
conversion rate by approximately 3 percent, so relieving that 
requirement for those States would have some net budget impact. 
Nevertheless, while the changes expand options for grant recipients to 
meet the service obligation by allowing grant recipients who are not 
teaching in a high-need subject area to qualify by teaching at a low-
income school in a geographic shortage area or in a grade-level 
shortage area, we do not believe the final regulations would lead to a 
significant increase in the actual number of TEACH grant recipients.
---------------------------------------------------------------------------

    \15\ https://tsa.ed.gov/#/reports.
    \16\ U.S. Department of Education, National Center for Education 
Statistics, Digest of Education Statistics 2017, Table 209.30. 
Highest degree earned, years of full-time teaching experience, and 
average class size for teachers in public elementary and secondary 
schools, by state: 2011-12. Data not reported for 5 states, 
including the District of Columbia, so percentage is adjusted to be 
total of those reporting.
    \17\ United States Department of Education, National Center for 
Education Statistics, Condition of Education--Characteristics of 
Traditional Public Schools and Charter Schools, Figure 3. Percentage 
of traditional public schools and public charter schools, by 
percentage of students eligible for free or reduced-price lunch: 
School year 2016-17. Available at https://nces.ed.gov/programs/coe/indicator_cla.asp.
---------------------------------------------------------------------------

    Overall, the final regulations have the potential to improve some 
aspects of the certification process and opportunities for recipients 
to meet their service requirements, which would benefit recipients, in 
keeping with the original goal of the program. As several provisions 
are expected to decrease the grant-to-loan conversion rate and result 
in additional cost to the Federal Government, we have estimated a net 
budget impact of that change.
    In addition to the 3 percent decrease attributed to the changes to 
the high needs field requirements, we assume that the additional 
changes to the TEACH Grant program described in this preamble will 
decrease grant-to-loan conversions. We expect this effect will be lower 
for existing cohorts as improved counseling is provided to future 
participants and participants who took out TEACH Grants several years 
ago may be established in jobs that may not qualify or may have moved 
on from the profession, possibly limiting the ways those with older 
TEACH grants may respond to the changes made by these regulations. As a 
result, we applied the decreases shown in Table [2] to the grant-to-
loan conversion rate to the President's Budget 2021 baseline. For past 
cohorts, the changes are applied only to future years of activity.

         Table 2--Grant-to-Loan Conversion Rate Decrease Factor
------------------------------------------------------------------------
                                                               Decrease
                          Cohorts                                (%)
------------------------------------------------------------------------
2008-2012..................................................            4
2013-2019..................................................            9
2020-2029..................................................           15
------------------------------------------------------------------------

    The estimated net budget impact is a cost of $141.4 million, 
including a modification to existing cohorts of $16.6 million and a 
cost for cohorts 2020 to 2029 of $124.8 million.
    A number of the changes to the regulations relate to the 
eligibility of certain entities and recipients to participate in the 
title IV programs. The final regulations remove language prohibiting 
borrowers with Perkins loans made before July 1, 1993 and National 
Defense Student Loans (NDSL) made between October 1, 1980 and July 1, 
1993 from obtaining deferments during periods of otherwise eligible 
full-time volunteer work that includes providing religious instruction, 
conducting religious services, proselytizing, or engaging in 
fundraising to support religious activities. Due to the small group of 
borrowers expected to benefit from these changes and the heavy 
discounting effect that would apply to any deferment costs on such old 
loans, we do not estimate any budget impact from these changes.
    The final regulations remove current provisions that state that a 
member of a religious order pursuing a course of study in an 
institution of higher education has no financial need for purposes of 
the Pell Grant Program, Federal Perkins Loan Program, FWSP, FSEOG, FFEL 
Program, or the Direct Loan Program.
    Despite this change, the additional eligibility for student aid for 
a very small group of participants in a given religious order would 
not, in our estimation, result in any additional significant financial 
aid costs to the government. We have little firm data on the number of 
members in religious orders subject to these changes who would actually 
choose to accept the financial aid for which they are eligible. For 
instance, the Franciscans are perhaps the largest and most well-known 
mendicant religious order, which means the priests take a vow of 
poverty. According to a 2013 reference,\18\ there are around 14,000 
first order Franciscan members, including 9,700 priests. Even 
considering other orders within the Franciscans and additional smaller 
monastic sects such as the Benedictines and Dominicans, the membership 
estimates would not be large. Thus, the Department believes that the 
pool of members potentially impacted by this regulatory change is 
already small to begin with and the final regulations are not going to 
induce changes in member practices and would not result in measurable 
financial aid estimates. Note that there are already many postsecondary 
institutions with a faith-based mission that are title IV eligible and 
are not affected by these final regulations. Therefore, the changes 
would allow our regulations to be consistent with the Supreme Court 
decision in Trinity Lutheran without involving a significant economic 
impact.
---------------------------------------------------------------------------

    \18\ Annuario Pontificio 2013 (Libreria Editrice Vaticana 2013 
ISBN 978-88-209-9070-1), p. 1422.
---------------------------------------------------------------------------

    The regulatory changes would also affect PSLF. Under the final 
regulations, certain institutions that are tax-exempt under section 
501(c)(3) of the Internal Revenue Code that are religious organizations 
would be considered public service eligible employers for purposes of 
PSLF. The application form for PSLF (OMB No. 1845-0110) specifically 
states that a qualifying employer includes a ``not-for-profit 
organization that is tax-exempt under Section 501(c)(3) of the Internal 
Revenue Code'' but makes no exclusion for religious purposes. The 
current application makes it clear that, in performing job duties 
toward the full-time requirement, a borrower's qualifying employment at 
a 501(c)(3) organization or a not-for-profit organization does not 
include time spent participating in religious instruction, worship 
services, or any form of proselytizing. This provision is changed in 
the final regulations in response to concerns that such provisions 
would violate RFRA. There is little to no existing data within the 
Department to isolate the potential population that may be newly 
eligible after this changed rule. The Department's assumption under the 
NPRM was that eligible 501(c)(3) employers and workers would cooperate 
in the structure of their work responsibilities to allow all 
potentially eligible workers not engaging in exclusively religious 
activity to meet the existing qualification requirements. However, 
there may have been previously ineligible workers, primarily clergy, 
who will be eligible under the changed rule. While their employers may 
have met the 501(c)(3) criteria, they were prohibited from receiving 
forgiveness due to the ineligibility of their work activities under the 
existing regulation. Based on an analysis of Bureau of Labor Statistics 
(BLS) data,

[[Page 49815]]

the percentage of workers at non-profit religious organizations as a 
proportion of the total population of workers potentially eligible for 
Public Service Loan Forgiveness is very small, approximately 0.50% of 
total workers. This high-level potential population is further reduced 
by isolating the BLS occupation clergy, a proxy for our analysis 
purposes of workers engaged in exclusively previously ineligible 
activity at otherwise eligible 501(c)(3) employers. Further 
characteristics that filter this population are the percentage who 
borrow, percentage who work full-time, and finally, the percentage who 
the Department estimates will successfully complete the requirements 
for PSLF, that is 120 qualifying payments and 10 years of service. 
These estimated adjustments to the currently eligible PSLF population 
for this newly eligible potential population results in a 0.06% 
increase in the population qualifying for PSLF from the current 
baseline. Transfers in the Direct Loan Program for subsidy costs 
related to this potential group of newly eligible potential population 
may be as much as $213 million, $122 million for existing cohorts and 
$91 million for future cohorts.
    The changes to the GEAR UP program regulations would clarify that 
providers of GEAR UP services to students enrolled in private schools 
must be contracted independently of the private schools and would allow 
pervasively sectarian institutions of higher education to serve as 
fiscal agents for GEAR UP grants. In general, the Department does not 
estimate costs associated with changes to regulations governing 
competitive grant programs as participation in such programs is 
voluntary and funding still must be limited to what is appropriated by 
Congress. However, it is possible that certain changes in the 
regulatory framework governing a competitive grant program could 
produce transfers in program benefits among entities or recipients of 
services.
    Regarding the provision requiring providers of services to students 
enrolled in private schools to be independent of the school, the 
Department first assessed the extent to which GEAR UP services are 
currently provided to students enrolled in such schools. During the 
most recent reporting period, GEAR UP grantees reported serving 
students in 4,033 schools. Of those schools, the Department was able to 
identify only five private schools in which students received GEAR UP 
services. In total, private schools represented only 0.1 percent of 
schools served by the program and, even among the grantees serving such 
schools, private schools represented 0.9 percent of the total schools 
they served. As such, we do not believe that the requirement relating 
to the employment relationship between individuals providing services 
in such schools and the schools themselves is likely to have a large 
impact on the administration of the program.
    Regarding who may serve as a fiscal agent for a GEAR UP Grant, as 
noted above, the final regulations would allow pervasively sectarian 
institutions of higher education to serve in such a capacity. However, 
nothing in the current GEAR UP regulations precludes a pervasively 
sectarian institution of higher education from being a member of a GEAR 
UP partnership. As such, pervasively sectarian institutions can 
currently participate in and provide services under a GEAR UP grant. 
The Department does not have readily available data to identify all 
members of GEAR UP partnerships and whether they are pervasively 
sectarian. With such information, the Department could more easily 
quantify the potential number of partnerships affected by the change. 
However, even without such information, given that pervasively 
sectarian institutions are already eligible members of partnerships, we 
do not believe the change to allow them to serve as fiscal agents would 
dramatically change the makeup of the GEAR UP applicant pool. Any 
pervasively sectarian institution that currently wishes to participate 
in the GEAR UP program may do so and this change would only result in a 
shift in who has primary fiscal liability for the grant.

Alternatives Considered

    With respect to the TEACH Grant program, we considered maintaining 
the current regulations as is, that is not including provisions related 
to the current reconsideration process in the final regulations, 
maintaining the current counseling requirements without adding a 
separate conversion counseling requirement, maintaining, instead of 
expanding, the current regulations related to qualifying teacher 
shortage areas for fulfilling the service obligation, and not expanding 
allowable suspensions beyond those that are currently available. As we 
describe in previous sections, making these changes gives the 
Department the opportunity to address GAO concerns specifically, and 
generally provide from more information and clarity to recipients of 
the TEACH Grant program.
    For the faith-based provisions, we considered not making the 
changes and leaving the current regulatory language in place as 
written.

Regulatory Flexibility Act Certification

    The Secretary certifies that the final regulations will not have a 
significant economic impact on a substantial number of small entities. 
In fact, the primary entities who are affected by the final regulations 
are individual students, not organizations, businesses, or governmental 
units. This holds true for the faith-based component of the final 
regulations that address individuals participating in religious orders, 
or student borrowers applying for PSLF. Similarly, the changes to the 
TEACH Grant Program regulations primarily affect students who are 
interested in teaching and apply for a TEACH grant.
    Of the entities that would be affected by the final regulations, 
many institutions, especially institutions with a faith-based mission, 
would be considered small. The Department recently proposed a size 
classification based on enrollment using IPEDS data that established 
the percentage of institutions in various higher education sectors 
considered to be small entities, as shown in Table [6].\19\ This size 
classification was described in the NPRM published in the Federal 
Register on July 31, 2018 for the proposed borrower defense rule (83 FR 
37242, 37302). Under the Department's proposed size standards, ``small 
entities'' have an enrollment of 1,000 students or less at 4-year 
schools or 500 students or less at 2-years schools. The Department has 
discussed the proposed standard with the Chief Counsel for Advocacy of 
the Small Business Administration, and while no change has been 
finalized, the Department continues to believe this approach better 
reflects a common basis for determining size categories that is linked 
to the provision of educational services.
---------------------------------------------------------------------------

    \19\ U.S. Department of Education, National Center for Education 
Statistics. Integrated Postsecondary Education Data System 2016 
Institutional Characteristics: Directory Information survey file 
downloaded March 3, 2018. Available at nces.ed.gov/ipeds/datacenter/DataFiles.aspx.

[[Page 49816]]



                            Table 6--Small Entities Under Enrollment Based Definition
----------------------------------------------------------------------------------------------------------------
                 Level                            Type                 Small           Total          Percent
----------------------------------------------------------------------------------------------------------------
2-year................................  Public..................             342           1,240              28
2-year................................  Private.................             219             259              85
2-year................................  Proprietary.............           2,147           2,463              87
4-year................................  Public..................              64             759               8
4-year................................  Private.................             799           1,672              48
4-year................................  Proprietary.............             425             558              76
                                                                 -----------------------------------------------
    Total.............................  ........................           3,996           6,951              57
----------------------------------------------------------------------------------------------------------------

    The final regulations would affect students who belong to religious 
orders and those students most likely attend institutions with a 
religious mission. In general, we believe faith-based institutions are 
more likely to be small institutions. However, the final regulations do 
not affect the title IV eligibility of such institutions.
    Accordingly, The Secretary certifies that the final regulations 
will not have a significant economic impact on a substantial number of 
small entities. Nothing in the final regulations would compel 
institutions, small or not, to engage in substantive changes to their 
programs. Therefore, there is no estimated associated institutional 
burden.
    Even if the affected institutions were considered small entities, 
the final regulations are designed to permit them to participate in 
title IV programs without jeopardizing their religious mission. Nothing 
in the final regulations would require institutions to expand their 
enrollment, take on additional students, or to participate in title IV 
aid programs, but the final regulations would give them that 
opportunity.

Paperwork Reduction Act of 1995

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department provides the general public and Federal agencies 
with an opportunity to comment on proposed and continuing collections 
of information in accordance with the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3506(c)(2)(A)). This helps ensure that: The public 
understands the Department's collection instructions, respondents can 
provide the requested data in the desired format, reporting burden 
(time and financial resources) is minimized, collection instruments are 
clearly understood, and the Department can properly assess the impact 
of collection requirements on respondents.
    Part 686 contains information collection requirements. Under the 
PRA the Department has submitted a copy of these sections to OMB for 
its review.
    A Federal agency may not conduct or sponsor a collection of 
information unless OMB approves the collection under the PRA and the 
corresponding information collection instrument displays a currently 
valid OMB control number.
    Notwithstanding any other provision of law, no person is required 
to comply with, or is subject to penalty for failure to comply with, a 
collection of information if the collection instrument does not display 
a currently valid OMB control number.
    In the final regulations we will display the control numbers 
assigned by OMB to any collection requirements adopted in the final 
regulations.
    Section 686.12--Agreement to serve or repay.
    Requirements: Under final Sec.  686.12, the TEACH Grant agreement 
to serve or repay will be expanded and updated with revised 
definitions, requirements, and explanations of the program and 
participant conditions, and options as discussed in the preamble.
    Burden Calculation: These final regulations will require changes to 
the TEACH Grant agreement to serve form currently approved under OMB 
Control Number 1845-0083. We do not believe those changes will impact 
the current burden associated with this form. We estimate that, on 
average, it will take a grant recipient 30 minutes (.50 hours) to 
review and complete the updated agreement, which is done 
electronically. We continue to anticipate 50,793 TEACH applicants will 
annually utilize the agreement accepting the program terms, including 
the required teaching service, or the conversion of the grant to a 
Direct Unsubsidized Loan if such service is not met or the applicant 
does not otherwise comply with the terms of the agreement. Based on one 
response per applicant, we continue to estimate an annual reporting 
burden for individuals of 25,397 hours (50,793 x .50 hours).

                                   Sec.   686.12--Agreement To Serve or Repay
                                         [OMB control number 1845-0083]
----------------------------------------------------------------------------------------------------------------
                                                                                      Time to
                     Entity                         Respondent       Responses        respond      Burden hours
                                                                                      (hours)
----------------------------------------------------------------------------------------------------------------
Individual......................................          50,793          50,793             .50          25,397
                                                 ---------------------------------------------------------------
    Total.......................................          50,793          50,793  ..............          25,397
----------------------------------------------------------------------------------------------------------------

    Section 686.32--Counseling requirements.
    Requirements: The final regulations in Sec.  686.32 will expand the 
information that is provided to TEACH Grant recipients during initial, 
subsequent, and exit counseling. The final regulations will add a new 
conversion counseling requirement for grant recipients whose TEACH 
Grants are converted to Direct Unsubsidized Loans.
    Burden Calculation: Currently there is burden of 24,459 hours 
assessed to 37,749 respondents for the counseling requirements of Sec.  
686.32 in the regulatory information collection 1845-0084 as filed in 
January 2018. These figures do not include the new conversion 
counseling that will be required under the final regulations. The 
expansion and revision of the

[[Page 49817]]

required program counseling will require changes to the counseling 
currently available. We anticipate that approximately 1,520 TEACH Grant 
recipients will either voluntarily convert their grant to a loan or 
will run out of time to complete the teaching obligation and have the 
grant converted to a loan. This is based on the number of voluntary and 
out of time conversions noted for 2019. We do not believe there will be 
a significant increase or decrease in such activity.
    We believe that it will take a TEACH Grant recipient the same 
approximate 20 minutes (.33 hours) to review the new conversion 
counseling materials as it takes them to review the other required 
counseling materials. We estimate the total burden of 502 hours (1,520 
x .33 hours) for recipients to review the conversion counseling 
material.
    The changes to the initial, subsequent, exit, and new conversion 
counseling information collection will be completed and a full public 
clearance filing will be made after publication of the final rule and 
before being made available for use by the effective date of the 
regulations.

                                     Sec.   686.32--Counseling Requirements
                      [OMB control number 1845-0084 new conversion counseling figures only]
----------------------------------------------------------------------------------------------------------------
                                                                                      Time to
                     Entity                         Respondent       Responses        respond      Burden hours
                                                                                      (hours)
----------------------------------------------------------------------------------------------------------------
Individual......................................           1,520           1,520             .33             502
                                                 ---------------------------------------------------------------
    Total.......................................           1,520           1,520  ..............             502
----------------------------------------------------------------------------------------------------------------

    Section 686.40--Documenting the service obligation.
    Requirements: The final regulations clarify the requirements 
regarding the documentation of completion of the teaching service 
obligation in the TEACH Grant Program and how it is reported. To 
support the requirement, we provided a draft ``TEACH Grant 
Certification of Completed Teaching'' form with the Notice of Proposed 
Rulemaking. While no public comments were received regarding the form, 
we have determined that we need to add to the form. We are modifying 
the ``TEACH Grant Certification of Completed Teaching'' form by adding 
an option to allow TEACH Grant recipients to certify that they have 
begun qualifying teaching service within a timeframe that will allow 
them to complete the service obligation within the eight year service 
obligation period, to avoid having their TEACH Grants converted to 
loans in accordance with Section 686.43(a)(1)(ii). This form continues 
to require both TEACH grant recipient and eligible school official 
information.
    Burden Calculation: The changes to the regulations relating to the 
required service obligation will require a new certification form. 
During the 2018 calendar year, Department records indicate we received 
documentation for 52,989 grantees regarding yearly service obligation 
completion. We estimate that to meet the requirements of Sec.  686.40 
each respondent will need 20 minutes (.33 hours) to complete the 
certification form. We estimate the total burden of 17,486 hours 
(52,989 x .33 hours) for completion of this form.
    We believe that the second certification option on the ``TEACH 
Grant Certification of Completed Teaching'' form is needed to allow 
TEACH Grant recipients who have not yet completed any qualifying 
teaching, but who have sufficient time remaining in the eight-year 
service obligation period to complete the required four-years of 
teaching, to certify that they have begun qualifying teaching to avoid 
conversion of the TEACH Grants to loans under Section 686.43(a)(1)(ii). 
We estimate that to meet the certification requirements each respondent 
will need 20 minutes (.33 hours) to complete the certification form. We 
estimate that approximately 24 TEACH Grant recipients will submit the 
certification form for this purpose. We estimate a total burden of 8 
hours (24 x .33 hours = 8 hours) for completion of the form.
    We estimate the total burden of 17,494 hours (53,013 x .33 hours) 
under OMB Control Number 1845-0158.

                                Sec.   686.40--Documenting the Service Obligation
                                         [OMB control number 1845-0158]
----------------------------------------------------------------------------------------------------------------
                                                                                      Time to
                     Entity                         Respondent       Responses        respond      Burden hours
                                                                                      (hours)
----------------------------------------------------------------------------------------------------------------
Individual documenting service obligation.......          52,989          52,989             .33          17,486
Individual documenting beginning eligible                     24              24             .33               8
 teaching.......................................
                                                 ---------------------------------------------------------------
    Total.......................................          53,013          53,013  ..............          17,494
----------------------------------------------------------------------------------------------------------------

    Section 686.41--Periods of suspension.
    Requirements: The final regulations add new conditions under which 
a TEACH Grant recipient may receive a temporary suspension of the 
period for completing the service obligation.
    Burden Calculation: The final regulations added new conditions that 
will allow a TEACH Grant recipient to receive a temporary suspension of 
the period for completing the service obligation. These new conditions, 
including completion of licensure requirements, military orders for the 
grantee's spouse, and residing or being employed in a federally 
declared major disaster area require new temporary suspension forms. 
The qualifying leave under the Family and Medical Leave Act of 1993, 
and the call to military service are retained in the regulations.
    Department records indicate that, during the 2018 calendar year, we 
received documentation supporting suspension of 589 grantees for 
enrollment to complete licensure

[[Page 49818]]

requirements. We estimate that to meet the requirements in final Sec.  
686.41(a)(1)(ii), each respondent will need 20 minutes (.33 hours) to 
complete the certification form. We estimate a total burden of 194 
hours (589 x .33 hours).
    Department records indicate that, during the 2018 calendar year, we 
received documentation supporting suspension of 334 grantees for 
qualifying leave under the Family and Medical Leave Act of 1993. We 
estimate that to meet the requirements in final Sec.  
686.41(a)(1)(iii), each respondent will need 20 minutes (.33 hours) to 
complete the certification form. We estimate a total burden of 110 
hours (334 x .33 hours).
    Department records indicate that, during the 2018 calendar year, we 
received documentation supporting suspension of 24 grantees for call to 
military service. We estimate that to meet the requirements in final 
Sec.  686.41(a)(1)(iv), each respondent will need 20 minutes (.33 
hours) to complete the certification form. We estimate a total burden 
of 8 hours (24 x .33 hours).
    We anticipate that we will receive documentation supporting 
suspension of 25 grantees based on military orders for the grantee's 
spouse. We estimate that to meet the requirements in final Sec.  
686.41(a)(1)(v), each respondent will need 20 minutes (.33 hours) to 
complete the certification form. We estimate a total burden of 8 hours 
(25 x .33 hours).
    We anticipate that we will receive documentation supporting 
suspension of 500 grantees based on residing or being employed in a 
federally declared major disaster area. We estimate that to meet the 
requirements in final Sec.  686.41(a)(1)(vi), each respondent will need 
20 minutes (.33 hours) to complete the certification form. We estimate 
a total burden of 165 hours (500 x .33 hours).
    We estimate the total burden of 485 hours (1,472 x .33 hours) under 
OMB Control Number 1845-0158.

                                      Sec.   686.41--Periods of Suspension
                                         [OMB control number 1845-0158]
----------------------------------------------------------------------------------------------------------------
                                                                                      Time to
                     Entity                         Respondent       Responses        respond      Burden hours
                                                                                      (hours)
----------------------------------------------------------------------------------------------------------------
Individual (a)(1)(ii)...........................             589             589             .33             194
Individual (a)(1)(iii)..........................             334             334             .33             110
Individual (a)(1)(iv)...........................              24              24             .33               8
Individual (a)(1)(v)............................              25              25             .33               8
Individual (a)(1)(vi)...........................             500             500             .33             165
                                                 ---------------------------------------------------------------
    Total.......................................           1,472           1,472  ..............             485
----------------------------------------------------------------------------------------------------------------

    Section 686.42--Discharge of agreement to serve or repay.
    Requirements: The final regulations revise the conditions under 
which a TEACH Grant recipient may discharge an agreement to serve or 
repay based on military service.
    Burden Calculation: Department records indicate that, during the 
2018 calendar year, we received documentation supporting suspension of 
10 grantees for discharge due to an extended call to military service. 
We estimate that to meet the requirements in final Sec.  686.42(c), 
each respondent will need 20 minutes (.33 hours) to complete the new 
certification form also used for military service suspension.
    We estimate a total burden of 3 hours (10 x .33 hours) under OMB 
Control Number 1845-0158.

                             Sec.   686.42--Discharge of Agreement to Serve or Repay
                                         [OMB control number 1845-0158]
----------------------------------------------------------------------------------------------------------------
                                                                                      Time to
                     Entity                         Respondent       Responses        respond      Burden hours
                                                                                      (hours)
----------------------------------------------------------------------------------------------------------------
Individual......................................              10              10             .33               3
                                                 ---------------------------------------------------------------
    Total.......................................              10              10  ..............               3
----------------------------------------------------------------------------------------------------------------

    Section 686.43--Obligation to repay the grant.
    Requirements: The final regulations simplify the rules governing 
when a TEACH Grant will be converted to a Direct Unsubsidized Loan and 
provide for annual notifications from the Secretary to the recipient 
regarding the status of a recipient's TEACH Grant service obligation. 
Under the final regulations, a TEACH Grant recipient can request 
conversion of the grant to a loan if the recipient decides not to 
fulfill the TEACH Grant obligations for any reason or if the recipient 
fails to begin or maintain qualifying teaching service within a 
timeframe that would allow the recipient to complete the service 
obligation in the requisite eight-year period. Additionally, the final 
regulations describe the notifications the Secretary will annually send 
to all TEACH Grant recipients regarding the service obligation 
requirements.
    Burden Calculation: We believe that the final regulations will 
require action on the part of TEACH grant recipients. Based on 
Department data, during the 2018 calendar year there were 52,989 TEACH 
Grant recipients who submitted evidence of completed teaching service. 
We estimate that an additional 25 percent of that figure or about 
13,247 grant recipients will be working toward their teaching 
obligation for a total of 66,236 grant recipients who will receive the 
annual notice from the Secretary as required under final Sec.  
686.43(a)(2). We estimate that grant recipients will require 10 minutes 
(.17 hours) to review the information provided in each annual notice. 
We estimate the total burden of 11,260 hours (66,236 x .17 hours).
    There will be burden on those recipients who are notified that 
their

[[Page 49819]]

TEACH Grant will be converted to a loan if the recipient does not 
submit required documentation to show that they are satisfying the 
service obligation. Based on the Department's data, during calendar 
year 2018 there were a total of 10,591 TEACH Grant recipients whose 
grants were converted to loans based on the recipients' voluntary 
request, or because the recipient was out of time to perform the 
service obligation or because the recipient did not provide evidence of 
meeting the service obligation as required under Sec.  686.43(a)(4). We 
estimate that grant recipients will require 10 minutes (.17 hours) to 
review the information in the notice. We estimate a total burden of 
1,800 burden hours (10,591 x .17 hours).
    Additionally, there will be burden on any TEACH Grant recipient 
whose grant was involuntarily converted to a Direct Unsubsidized Loan 
to request reconsideration from the Secretary. Based on the 
Department's data, during calendar year 2018 there were 282 correctable 
conversions of TEACH Grants into loans. We estimate that a recipient 
will require 15 minutes (.25 hours) to gather documentation to present 
to the Secretary and make such a request as required under Sec.  
686.43(a)(5). We estimate a total burden of 71 burden hours (282 x .25 
hours).
    We estimate a total burden of 13,131 burden hours under OMB Control 
Number 1845-0157.

                                  Sec.   686.43--Obligation To Repay the Grant
                                         [OMB control number 1845-0157]
----------------------------------------------------------------------------------------------------------------
                                                                                      Time to
                     Entity                         Respondent       Responses        respond      Burden hours
                                                                                      (hours)
----------------------------------------------------------------------------------------------------------------
Individual (a)(2)...............................          66,236          66,236             .17          11,260
Individual (a)(4)...............................               *          10,591             .17           1,800
Individual (a)(5)...............................               *             282             .25              71
                                                 ---------------------------------------------------------------
    Total.......................................          66,236          77,109  ..............          13,131
----------------------------------------------------------------------------------------------------------------
* These respondents will be part of the universe of respondents who receive the annual notifications and are not
  summed to avoid duplication of respondents.

    The estimated cost to the recipients is $1,680,714, based on the 
$29.48 per hour averaged for 2018 elementary, middle school and high 
school teacher salaries from the 2019 Bureau of Labor Statistics 
Occupational Handbook.

----------------------------------------------------------------------------------------------------------------
                                                                            OMB control No. and
         Regulatory section                 Information collection            estimated burden       Estimated
                                                                             (change in burden)        costs
----------------------------------------------------------------------------------------------------------------
Sec.   686.12 Agreement to serve or  Under final Sec.   686.12 the TEACH   1845-0083 +25,397            $748,704
 repay.                               Grant agreement to serve or repay     hours.
                                      will need to be expanded and
                                      updated with revised definitions,
                                      requirements, and explanations of
                                      the program and participant
                                      conditions, and options as
                                      discussed in the preamble.
Sec.   686.32 Counseling             The final regulations in Sec.         1845-0084 +502 hours.          14,799
 requirements.                        686.32 will expand the information
                                      that is provided to TEACH Grant
                                      recipients during initial,
                                      subsequent, and exit counseling.
                                      The final regulations add a new
                                      conversion counseling requirement
                                      for grant recipients whose TEACH
                                      Grants are converted to Direct
                                      Unsubsidized Loans.
Sec.   686.40 Documenting the        The final regulations will clarify    1845-0158 +17,494             515,723
 service obligation.                  the requirements regarding the        hours.
                                      documentation of completion of the
                                      teaching service obligation in the
                                      TEACH Grant Program and how it is
                                      reported.
Sec.   686.41 Periods of suspension  The final regulations will add new    1845-0158 +485 hours.          14,298
                                      conditions under which a TEACH
                                      Grant recipient may receive a
                                      temporary suspension of the period
                                      for completing the service
                                      obligation.
Sec.   686.42 Discharge of           The final regulations will revise     1845-0158 +3 hours...              88
 agreement to serve or repay.         the language for conditions under
                                      which a TEACH Grant recipient may
                                      discharge an agreement to serve or
                                      repay based on military service.
Sec.   686.43 Obligation to repay    The final regulations will simplify   1845-0157 +13,131             387,102
 the grant.                           the rules governing when a TEACH      hours.
                                      Grant will be converted to a Direct
                                      Unsubsidized Loan, as well as
                                      provide for annual notifications
                                      from the Secretary to the recipient
                                      regarding the status of a
                                      recipient's TEACH Grant service
                                      obligation. Under the final
                                      regulations, TEACH Grant recipients
                                      can request conversion if the
                                      recipient decides not to fulfill
                                      the TEACH Grant obligations for any
                                      reason or if the recipient fails to
                                      begin or maintain qualifying
                                      teaching service within a timeframe
                                      to complete the service obligation
                                      in the requisite eight-year period.
                                      Additionally, the final regulations
                                      describe the notifications the
                                      Secretary will annually send to all
                                      TEACH Grant recipients regarding
                                      the service obligation requirements.
----------------------------------------------------------------------------------------------------------------

Collections of Information

    The total burden hours and change in burden hours associated with 
each OMB control number affected by the final regulations follows:

[[Page 49820]]



------------------------------------------------------------------------
                                    Total burden      Change in burden
           Control No.                  hours              hours
------------------------------------------------------------------------
1845-0083........................          25,397  No change.
1845-0084........................          37,175  +502.
1845-0158........................          17,982  +17,982.
1845-0157........................          13,131  +13,131.
                                  --------------------------------------
    Total........................          93,685  31,615.
------------------------------------------------------------------------

Intergovernmental Review

    These programs are not subject to Executive Order 12372 and the 
regulations in 34 CFR part 79.

Assessment of Educational Impact

    In the NPRM we requested comments on whether the regulations would 
require transmission of information that any other or authority of the 
United States gathers or makes available.
    Based on the response to the NPRM and on our review, we have 
determined that these final regulations do not require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., braille, large print, 
audiotape, or compact disc) on request to the program contact person 
listed under FOR FURTHER INFORMATION CONTACT.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. You may 
access the official edition of the Federal Register and the Code of 
Federal Regulations at www.govinfo.gov. At this site you can view this 
document, as well as all other documents of this Department published 
in the Federal Register, in text or Adobe Portable Document Format 
(PDF). To use PDF, you must have Adobe Acrobat Reader, which is 
available free at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

(Catalog of Federal Domestic Assistance Number does not apply.)

List of Subjects

34 CFR Part 674

    Loan programs--education, Reporting and recordkeeping, Student aid.

34 CFR Part 675

    Colleges and universities, Employment, Grant programs--education, 
Reporting and recordkeeping requirements, Student aid.

34 CFR Part 676

    Grant programs--education, Reporting and recordkeeping 
requirements, Student aid.

34 CFR Part 682

    Administrative practice and procedure, Colleges and universities, 
Loan programs--education, Reporting and recordkeeping requirements, 
Student aid, Vocational education.

34 CFR Part 685

    Administrative practice and procedure, Colleges and universities, 
Loan programs--education, Reporting and recordkeeping requirements, 
Student aid, Vocational education.

34 CFR Part 686

    Administrative practice and procedure, Colleges and universities, 
Education, Elementary and secondary education, Grant programs--
education, Reporting and recordkeeping requirements, Student aid.

34 CFR Part 690

    Colleges and universities, Education of disadvantaged, Grant 
programs--education, Reporting and recordkeeping requirements, Student 
aid.

34 CFR Part 692

    Colleges and universities, Grant programs--education, Reporting and 
recordkeeping requirements, Student aid.

34 CFR Part 694

    Colleges and universities, Elementary and secondary education, 
Grant programs--education, Reporting and recordkeeping requirements, 
Student aid.

Betsy DeVos,
Secretary of Education.
    For the reasons discussed in the preamble, the Secretary of 
Education amends parts 674, 675, 676, 682, 685, 686, 690, 692, and 694 
of title 34 of the Code of Federal Regulations as follows:

PART 674--FEDERAL PERKINS LOAN PROGRAM

0
1. The authority citation for part 674 continues to read as follows:

    Authority:  20 U.S.C. 1070g, 1087aa-1087hh; Pub. L. 111-256, 124 
Stat. 2643; unless otherwise noted.


0
2. Section 674.9 is amended by:
0
a. In the introductory text, adding the words ``Prior to October 1, 
2017,'' at the beginning of the sentence, removing ``A'' and adding 
``a'' in its place. , and removing the word ``is'' and adding in its 
place the word ``was''; and
0
b. Revising paragraph (c).
    The revision reads as follows:


Sec.  674.9   Student eligibility.

* * * * *
    (c) Has financial need as determined in accordance with part F of 
title IV of the HEA.
* * * * *


Sec.  674.35  [Amended]

0
3. Section 674.35 is amended by removing paragraph (c)(5)(iv) and 
redesignating paragraph (c)(5)(v) as (c)(5)(iv).

0
4. Section 674.36 is amended by revising paragraph (c)(4) to read as 
follows:


Sec.  674.36   Deferment of repayment--NDSLs made on or after October 
1, 1980, but before July 1, 1993.

* * * * *
    (c) * * *
    (4) A full-time volunteer in service which the Secretary has 
determined is comparable to service in the Peace Corps or under the 
Domestic Volunteer Service Act of 1973 (ACTION programs). The Secretary 
considers that a borrower is providing comparable service if he or she 
satisfies the following four criteria:
    (i) The borrower serves in an organization that is exempt from 
taxation under the provisions of section 501(c)(3) of the Internal 
Revenue Code of 1954.
    (ii) The borrower provides service to low-income persons and their 
communities to assist them in eliminating poverty and poverty-related 
human, social, and environmental conditions.
    (iii) The borrower does not receive compensation that exceeds the 
rate prescribed under section 6 of the Fair Labor Standards Act of 1938 
(the Federal minimum wage), except that the tax-exempt organization may 
provide health, retirement, and other fringe benefits to the volunteer 
that are substantially equivalent to the benefits offered to other 
employees of the organization.
    (iv) The borrower has agreed to serve on a full-time basis for a 
term of at least one year.
* * * * *

PART 675--FEDERAL WORK-STUDY PROGRAMS

0
5. The authority citation for part 675 continues to read as follows:

    Authority:  20 U.S.C. 1070g, 1087, 1094; 42 U.S.C. 2751-2756b; 
unless otherwise noted.


[[Page 49821]]



0
6. Section 675.9 is amended by revising paragraph (c) to read as 
follows:


Sec.  675.9   Student eligibility.

* * * * *
    (c) Has financial need as determined in accordance with part F of 
title IV of the HEA.

0
7. Section 675.20 is amended by revising paragraph (c)(2)(iv) to read 
as follows:


Sec.  675.20   Eligible employers and general conditions and limitation 
on employment.

* * * * *
    (c) * * *
    (2) * * *
    (iv) Involve the construction, operation, or maintenance of so much 
of any facility as is used or is to be used for instruction that is 
predominantly devotional and religious or as a place for religious 
worship, except to the extent that excluding such work would impose a 
substantial burden on a person's exercise of religion.
* * * * *

PART 676--FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT 
PROGRAM

0
8. The authority citation for part 676 continues to read as follows:

    Authority:  20 U.S.C. 1070b-1070b-3, unless otherwise noted.


0
9. Section 676.9 is amended by revising paragraph (c) to read as 
follows:


Sec.  676.9   Student eligibility.

* * * * *
    (c) Has financial need as determined in accordance with part F of 
title IV of the HEA.

PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM

0
10. The authority citation for part 682 continues to read as follows:

    Authority: 20 U.S.C. 1071-1087-4, unless otherwise noted.


Sec.  682.210   [Amended]

0
11. Section 682.210 is amended by removing and reserving paragraph 
(m)(1)(iv).


Sec.  682.301   [Amended]

0
12. Section 682.301 is amended by removing paragraph (a)(2) and 
redesignating paragraph (a)(3) as paragraph (a)(2).

PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM

0
13. The authority citation for part 685 continues to read as follows:

    Authority: 20 U.S.C. 1070g, 1087a, et seq., unless otherwise 
noted.


Sec.  685.200   [Amended]

0
14. Section 685.200 is amended by removing and reserving paragraph 
(a)(2)(ii).

0
15. Section 685.219 is amended in paragraph (b) by revising the 
definition of ``public service organization'' and by revising paragraph 
(c)(1)(ii) to read as follows:


Sec.  685.219  Public Service Loan Forgiveness Program.

* * * * *
    (b) * * *
    Public service organization means:
    (i) A Federal, State, local, or Tribal government organization, 
agency, or entity;
    (ii) A public child or family service agency;
    (iii) A non-profit organization under section 501(c)(3) of the 
Internal Revenue Code that is exempt from taxation under section 501(a) 
of the Internal Revenue Code;
    (iv) A Tribal college or university; or
    (v)(A) A private organization that provides the following public 
services: Emergency management, military service, public safety, law 
enforcement, public interest law services, early childhood education 
(including licensed or regulated child care, Head Start, and State 
funded pre-kindergarten), public service for individuals with 
disabilities and the elderly, public health (including nurses, nurse 
practitioners, nurses in a clinical setting, and full-time 
professionals engaged in health care practitioner occupations and 
health care support occupations, as such terms are defined by the 
Bureau of Labor Statistics), public education, public library services, 
school library or other school-based services; and
    (B) Is not a business organized for profit, a labor union, or a 
partisan political organization.
* * * * *
    (c) * * *
    (1) * * *
    (ii) Is employed full-time by a public service organization or 
serving in a full-time AmeriCorps or Peace Corps position--
    (A) When the borrower makes the 120 monthly payments described 
under paragraph (c)(1)(iii) of this section;
    (B) At the time of application for loan forgiveness; and
    (C) At the time the remaining principal and accrued interest are 
forgiven.
* * * * *

PART 686--TEACHER EDUCATION ASSISTANCE FOR COLLEGE AND HIGHER 
EDUCATION (TEACH) GRANT PROGRAM

0
16. The authority citation for part 686 continues to read as follows:

    Authority: 20 U.S.C. 1070g, et seq., unless otherwise noted.


0
17. Section 686.1 is revised to read as follows:


Sec.  686.1   Scope and purpose.

    The TEACH Grant program awards grants to students who intend to 
teach, to help meet the cost of their postsecondary education. In 
exchange for the grant, the student must agree to serve as a full-time 
teacher in a high-need field in a school serving low-income students, 
or as a full-time teacher in a high-need field for an educational 
service agency serving low-income students, for at least four academic 
years within eight years of ceasing enrollment at the institution where 
the student received the grant or, in the case of a student who 
receives a TEACH Grant at one institution and subsequently transfers to 
another institution and enrolls in another TEACH Grant-eligible 
program, within eight years of ceasing enrollment at the other 
institution. The eight-year period for completing the required four 
years of teaching does not include periods of suspension in accordance 
with Sec.  686.41. If the student does not satisfy the service 
obligation, the amounts of the TEACH Grants received are treated as a 
Direct Unsubsidized Loan and must be repaid with interest charged from 
the date of each TEACH Grant disbursement. A TEACH Grant that has been 
converted to a Direct Unsubsidized Loan can be reconverted to a grant 
only in accordance with Sec.  686.43.

0
18. Section 686.2 is amended:
0
a. In paragraph (b), by adding in alphabetical order and entry for 
``Free application for Federal student aid (FAFSA)''; and
0
b. In paragraph (d) by:
0
i. Removing the definition of ``Agreement to serve (ATS)'' and adding 
in alphabetical order a definition for ``Agreement to serve or repay'';
0
ii. Adding in alphabetical order a definition for ``Educational service 
agency'';
0
iii. In paragraph (5) of the definition of ``High-need field'', adding 
``, including, but not limited to, computer science'' after the word 
``Science'';
0
iv. In paragraph (7) of the definition of ``High-need field'', removing 
the words ``in accordance with 34 CFR 682.210(q)'';

[[Page 49822]]

0
v. Revising the definition of ``Highly qualified'';
0
vi. Removing the definition of ``School serving low-income students 
(low-income school)'' and adding in alphabetical order a definition for 
``School or educational service agency serving low-income students 
(low-income school)'';
0
vii. Revising the definition of ``TEACH Grant-eligible program''; and
0
viii. Adding in alphabetical order a definition for ``Teacher Shortage 
Area Nationwide Listing (Nationwide List)''.
    The additions and revisions read as follows:


Sec.  686.2   Definitions.

* * * * *
    (b) * * *
    Free application for Federal student aid (FAFSA).
* * * * *
    (d) * * *
    Agreement to serve or repay: An agreement under which the 
individual receiving a TEACH Grant commits to meet the service 
obligation or repay the loan as described in Sec.  686.12 and to comply 
with notification and other provisions of the agreement.
* * * * *
    Educational service agency: A regional public multiservice agency 
authorized by State statute to develop, manage, and provide services or 
programs to local educational agencies (LEAs).
* * * * *
    Highly qualified: Has the meaning set forth in paragraphs (i) 
through (iv) of this definition, or the meaning set forth in section 
602(10) of the Individuals With Disabilities Education Act.
    (i) When used with respect to any public elementary school or 
secondary school teacher in a State, means that--
    (A) The teacher has obtained full State certification as a teacher 
(including certification obtained through alternative routes to 
certification) or passed the State teacher licensing examination, and 
holds a license to teach in such State, except that when used with 
respect to any teacher teaching in a public charter school, the term 
means that the teacher meets the requirements set forth in the State's 
public charter school law; and
    (B) The teacher has not had certification or licensure requirements 
waived on an emergency, temporary, or provisional basis.
    (ii) When used with respect to--
    (A) An elementary school teacher who is new to the profession, 
means that the teacher--
    (1) Holds at least a bachelor's degree; and
    (2) Has demonstrated, by passing a rigorous State test, subject 
knowledge and teaching skills in reading, writing, mathematics, and 
other areas of the basic elementary school curriculum (which may 
consist of passing a State-required certification or licensing test or 
tests in reading, writing, mathematics, and other areas of the basic 
elementary school curriculum); or
    (B) A middle or secondary school teacher who is new to the 
profession, means that the teacher holds at least a bachelor's degree 
and has demonstrated a high level of competency in each of the academic 
subjects in which the teacher teaches by--
    (1) Passing a rigorous State academic subject test in each of the 
academic subjects in which the teacher teaches (which may consist of a 
passing level of performance on a State-required certification or 
licensing test or tests in each of the academic subjects in which the 
teacher teaches); or
    (2) Successful completion, in each of the academic subjects in 
which the teacher teaches, of an academic major, a graduate degree, 
coursework equivalent to an undergraduate academic major, or advanced 
certification or credentialing.
    (iii) When used with respect to an elementary, middle, or secondary 
school teacher who is not new to the profession, means that the teacher 
holds at least a bachelor's degree and--
    (A) Has met the applicable standard in paragraph (ii) of this 
definition, which includes an option for a test; or
    (B) Demonstrates competence in all the academic subjects in which 
the teacher teaches based on a highly objective uniform State standard 
of evaluation that--
    (1) Is set by the State for both grade-appropriate academic subject 
matter knowledge and teaching skills;
    (2) Is aligned with challenging State academic content and student 
academic achievement standards and developed in consultation with core 
content specialists, teachers, principals, and school administrators;
    (3) Provides objective, coherent information about the teacher's 
attainment of core content knowledge in the academic subjects in which 
a teacher teaches;
    (4) Is applied uniformly to all teachers in the same academic 
subject and the same grade level throughout the State;
    (5) Takes into consideration, but is not based primarily on, the 
time the teacher has been teaching in the academic subject;
    (6) Is made available to the public upon request; and
    (7) May involve multiple, objective measures of teacher competency.
    (iv)(A) When used with respect to any public, or other non-profit 
private, elementary or secondary school teacher who is exempt from 
State certification requirements means that the teacher is permitted to 
and does satisfy rigorous subject knowledge and skills tests by taking 
competency tests in the applicable grade levels and subject areas.
    (B) For purposes of paragraph (iv)(A) of this definition, the 
competency tests taken by a private school teacher must be recognized 
by five or more States for the purpose of fulfilling the highly 
qualified teacher requirements as described in paragraphs (i) through 
(iii) of this definition, and the score achieved by the teacher on each 
test must equal or exceed the average passing score of those five 
States.
* * * * *
    School or educational service agency serving low-income students 
(low-income school): An elementary school, secondary school, or 
educational service agency that is listed in the Department's Teacher 
Cancellation Low-Income (TCLI) Directory. The Secretary considers all 
elementary and secondary schools and educational service agencies 
operated by the Bureau of Indian Education (BIE) in the Department of 
the Interior or operated on Indian reservations by Indian Tribal groups 
under contract or grant with the BIE to qualify as schools or 
educational service agencies serving low-income students.
* * * * *
    TEACH Grant-eligible program: An eligible program, as defined in 34 
CFR 668.8, is a program of study at a TEACH Grant-eligible institution 
that is designed to prepare an individual to teach as a highly 
qualified teacher in a high-need field and leads to a baccalaureate or 
master's degree, or is a post-baccalaureate program of study. A two-
year program of study that is acceptable for full credit toward a 
baccalaureate degree is considered to be a program of study that leads 
to a baccalaureate degree.
* * * * *
    Teacher Shortage Area Nationwide Listing (Nationwide List): A list 
of teacher shortage areas, as defined in 34 CFR 682.210(q)(8)(vii), in 
each State.
* * * * *

0
19. Section 686.10 is revised to read as follows:


Sec.  686.10  Application.

    To receive a grant under this part, a student must--

[[Page 49823]]

    (a) Complete and submit the Free application for Federal student 
aid (FAFSA) in accordance with the instructions in the FAFSA;
    (b) Complete and sign an agreement to serve or repay in accordance 
with Sec.  686.12; and
    (c) Provide any additional information requested by the Secretary 
and the institution.


Sec.  686.11   [Amended]

0
20. Section 686.11 is amended:
0
a. In paragraph (a)(1)(i), by removing the words ``submitted a 
completed application'' and adding in their place the words ``met the 
application requirements in Sec.  686.10'';
0
b. By removing paragraph (a)(1)(ii);
0
c. By redesignating paragraphs (a)(1)(iii), (iv), and (v) as paragraphs 
(a)(1)(ii), (iii), and (iv), respectively;
0
d. In paragraph (b) introductory text, by removing the words 
``submitted a completed application'' and adding in their place the 
words ``met the application requirements in Sec.  686.10'';
0
e. By removing paragraph (b)(1); and
0
f. By redesignating paragraphs (b)(2) and (3) as paragraphs (b)(1) and 
(2), respectively.

0
21. Section 686.12 is revised to read as follows:


Sec.  686.12  Agreement to serve or repay.

    (a) General. A student who meets the eligibility requirements in 
Sec.  686.11 may receive a TEACH Grant only after he or she signs an 
agreement to serve or repay provided by the Secretary and receives 
counseling in accordance with Sec.  686.32.
    (b) Contents of the agreement to serve or repay. The agreement to 
serve or repay--
    (1) Provides that, for each TEACH Grant-eligible program for which 
the student received TEACH Grant funds, the grant recipient must 
fulfill a service obligation by performing creditable teaching service 
by serving--
    (i) As a full-time teacher for a total of not less than four 
elementary or secondary academic years within eight years after the 
date the recipient ceased to be enrolled at the institution where the 
recipient received the TEACH Grant, or in the case of a student who 
receives a TEACH Grant at one institution and subsequently transfers to 
another institution and enrolls in another TEACH Grant-eligible 
program, within eight years of ceasing enrollment at the other 
institution;
    (ii) In a low-income school as defined in Sec.  686.2(d) and 
subject to the requirements under Sec.  686.40(a)(3);
    (iii) As a highly qualified teacher as defined in Sec.  686.2(d); 
and
    (iv) In a high-need field in the majority of classes taught during 
each elementary and secondary academic year;
    (2) Requires the grant recipient to submit, upon completion of each 
year of service, documentation of the service in the form of a 
certification by a chief administrative officer of the school;
    (3) Explains that the eight-year period for completing the service 
obligation does not include periods of suspension in accordance with 
Sec.  686.41;
    (4) Explains the conditions under which a TEACH Grant may be 
converted to a Direct Unsubsidized Loan, as described in Sec.  686.43;
    (5) Explains that, if a TEACH Grant is converted to a Direct 
Unsubsidized Loan, the grant recipient must repay the loan in full, 
with interest charged from the date of each TEACH Grant disbursement; 
and
    (6) Explains that to avoid further accrual of interest as described 
in paragraph (b)(5) of this section, a grant recipient who decides not 
to teach in a qualified school or field, or who for any other reason no 
longer intends to satisfy the service obligation, may request that the 
Secretary convert his or her TEACH Grant to a Direct Unsubsidized Loan 
so that the grant recipient may begin repaying immediately, instead of 
waiting for the TEACH Grant to be converted to a loan under the 
condition described in Sec.  686.43(a)(1)(ii); and
    (7) Explains that a grant recipient whose TEACH Grant was converted 
to a Direct Unsubsidized Loan based on a request from the recipient in 
accordance with Sec.  686.43(a)(1)(i) may request that the Secretary 
reconvert the recipient's loan to a TEACH Grant as provided in Sec.  
686.43(a)(8); and
    (8) Requires the grant recipient to comply with the terms, 
conditions, and other requirements consistent with Sec. Sec.  686.40 
through 686.43 that the Secretary determines to be necessary.
    (c) Completion of the service obligation. (1) A grant recipient 
must complete one service obligation for all TEACH Grants received for 
undergraduate study, and one service obligation for all TEACH Grants 
received for graduate study. Each service obligation begins when the 
grant recipient ceases enrollment at the institution where the TEACH 
Grants were received, or, in the case of a grant recipient who receives 
a TEACH Grant at one institution and subsequently transfers to another 
institution, within eight years from the date the grant recipient 
ceases enrollment at the other institution. However, creditable 
teaching service, a suspension approved under Sec.  686.41(a)(2), or a 
military discharge granted under Sec.  686.42(c)(2) may apply to more 
than one service obligation.
    (2) Unless paragraph (c)(3) of this section applies--
    (i) In the case of a TEACH Grant recipient who withdraws from an 
institution before completing a baccalaureate or post-baccalaureate 
program of study for which he or she received TEACH Grants, but later 
re-enrolls at the same institution or at a different institution in 
either the same baccalaureate or post-baccalaureate program or in a 
different TEACH Grant-eligible baccalaureate or post-baccalaureate 
program prior to the date that his or her TEACH Grants are converted to 
Direct Unsubsidized Loans under Sec.  686.43(a)(1)(ii) and receives 
additional TEACH Grants or the Secretary otherwise confirms that the 
grant recipient has re-enrolled in a TEACH Grant-eligible program, the 
Secretary adjusts the starting date of the period for completing the 
service obligation to begin when the grant recipient ceases to be 
enrolled at the institution where he or she has re-enrolled; and
    (ii) In the case of a TEACH Grant recipient who withdraws from an 
institution before completing a master's degree program of study for 
which he or she received TEACH Grants, but later re-enrolls at the same 
institution or at a different institution in either the same master's 
degree program or in a different TEACH Grant eligible master's degree 
program prior to the date that his or her TEACH Grants are converted to 
Direct Unsubsidized Loans under Sec.  686.43(a)(1)(ii) and receives 
additional TEACH Grants or the Secretary otherwise confirms that the 
grant recipient has re-enrolled in a TEACH Grant-eligible program, the 
Secretary adjusts the starting date of the period for completing the 
service obligation to begin when the grant recipient ceases to be 
enrolled at the institution where he or she has re-enrolled.
    (3) In the case of a TEACH Grant recipient covered under paragraph 
(c)(2)(i) or (ii) of this section who completed one or more complete 
academic years of creditable teaching service as described in Sec.  
686.12(b) during the period between the grant recipient's withdrawal 
and re-enrollment--
    (i) The Secretary does not adjust the starting date of the period 
for completing the service obligation unless requested by the 
recipient;
    (ii) The completed teaching service counts toward satisfaction of 
the grant recipient's service obligation under paragraph (c)(2)(i) of 
this section; and

[[Page 49824]]

    (iii) If the grant recipient continues to perform creditable 
teaching service after re-enrolling in a TEACH Grant-eligible program, 
the grant recipient may receive credit toward satisfaction of the 
service obligation for any complete academic years of creditable 
teaching performed while the recipient is concurrently enrolled in the 
TEACH Grant-eligible program only if the recipient does not request and 
receive a temporary suspension of the period for completing the service 
obligation under Sec.  686.41(a)(1)(i).
    (d) Teaching in a high-need field listed in the Nationwide List. 
For a grant recipient's teaching service in a high-need field listed in 
the Nationwide List to count toward satisfying the recipient's service 
obligation, the high-need field in which he or she prepared to teach 
must be listed in the Nationwide List for the State in which the grant 
recipient teaches--
    (1) For teaching service performed before July 1, 2010, at the time 
the grant recipient begins teaching in that field, even if that field 
subsequently loses its high-need designation for that State; or
    (2) For teaching service performed on or after July 1, 2010--
    (i) At the time the grant recipient begins teaching in that field, 
even if that field subsequently loses its high-need designation for 
that State; or
    (ii) At the time the grant recipient signed the agreement to serve 
or repay or received the TEACH Grant, even if that field subsequently 
loses its high-need designation for that State before the grant 
recipient begins teaching in that field.


Sec.  686.21  [Amended]

0
22. Section 686.21 is amended:
0
a. In paragraphs (a)(2)(i) and (ii), by removing the word ``aggregate'' 
and adding in its place the word ``total''; and
0
b. In paragraph(a)(2)(ii), by removing the words ``a master's degree'' 
and adding in their place the words ``graduate study''.


Sec.  686.31  [Amended]

0
23. Section 686.31 is amended:
0
a. In paragraph (a)(3), by adding the words ``or repay'' after the word 
``serve'' and
0
b. In paragraph (e)(2)(ii), by removing the word ``Federal'' before the 
words ``Direct Unsubsidized Loan''.

0
24. Section 686.32 is amended by revising paragraphs (a)(3), (b)(3), 
(c)(4), and (d) and adding paragraph (e) to read as follows:


Sec.  686.32   Counseling Requirements.

    (a) * * *
    (3) The initial counseling must--
    (i) Explain the terms and conditions of the TEACH Grant agreement 
to serve or repay as described in Sec.  686.12;
    (ii) Provide the grant recipient with information about how to 
identify low-income schools and documented high-need fields;
    (iii) Inform the grant recipient that, for the teaching to count 
towards the recipient's service obligation, the high-need field in 
which he or she has prepared to teach must be--
    (A) One of the six high-need fields listed in Sec.  686.2; or
    (B) A high-need field that is listed in the Nationwide List for the 
State in which the grant recipient teaches--
    (1) At the time the grant recipient begins teaching in that field, 
even if that field subsequently loses its high-need designation for 
that State; or
    (2) For teaching service performed on or after July 1, 2010, at the 
time the grant recipient signed the agreement to serve or repay or 
received the TEACH Grant, even if that field subsequently loses its 
high-need designation for that State before the grant recipient begins 
teaching in that field;
    (iv) Inform the grant recipient of the opportunity to request a 
suspension of the eight-year period for completion of the agreement to 
serve or repay and the conditions under which a suspension may be 
granted in accordance with Sec.  686.41;
    (v) Explain to the grant recipient that conditions, such as 
conviction of a felony, could preclude the grant recipient from 
completing the service obligation;
    (vi) Emphasize to the grant recipient that if the grant recipient 
fails or refuses to complete the service obligation contained in the 
agreement to serve or repay or any other condition of the agreement to 
serve or repay--
    (A) The TEACH Grant must be repaid as a Direct Unsubsidized Loan; 
and
    (B) The grant recipient will be obligated to repay the full amount 
of each grant and the accrued interest from each disbursement date;
    (vii) Explain the circumstances, as described in Sec.  686.43, 
under which a TEACH Grant will be converted to a Direct Unsubsidized 
Loan;
    (viii) Explain that to avoid further accrual of interest as 
described in Sec.  686.12(b)(4)(ii), a grant recipient who decides not 
to teach in a qualified school or field, or who for any other reason no 
longer intends to satisfy the service obligation, may request that the 
Secretary convert his or her TEACH Grant to a Direct Unsubsidized Loan 
that the grant recipient may begin repaying immediately, instead of 
waiting for the TEACH Grant to be converted to a loan under the 
condition described in Sec.  686.43(a)(1)(ii);
    (ix) Emphasize that, once a TEACH Grant is converted to a Direct 
Unsubsidized Loan, it may be reconverted to a grant only if--
    (A) The Secretary determines, based on documentation provided by 
the recipient or in the Secretary's records, that the grant recipient 
was satisfying the service obligation as described in Sec.  686.12 or 
that the grant was converted to a loan in error; or
    (B) In the case of a grant recipient whose TEACH Grant was 
converted to a Direct Unsubsidized Loan in accordance with Sec.  
686.43(a)(1)(i), the grant recipient requests that the Secretary 
reconvert the loan to a grant and is determined to be eligible for 
reconversion in accordance with Sec.  686.43(a)(8);
    (x) Review for the grant recipient information on the availability 
of the Department's Federal Student Aid Ombudsman's office;
    (xi) Describe the likely consequences of loan default, including 
adverse credit reports, garnishment of wages, Federal offset, and 
litigation; and
    (xii) Inform the grant recipient of sample monthly repayment 
amounts based on a range of student loan indebtedness.
    (b) * * *
    (3) Subsequent counseling must--
    (i) Review the terms and conditions of the TEACH Grant agreement to 
serve or repay as described in Sec.  686.12;
    (ii) Emphasize to the grant recipient that if the grant recipient 
fails or refuses to complete the service obligation contained in the 
agreement to serve or repay or any other condition of the agreement to 
serve or repay--
    (A) The TEACH Grant must be repaid as a Direct Unsubsidized Loan; 
and
    (B) The grant recipient will be obligated to repay the full amount 
of the grant and the accrued interest from the disbursement date;
    (iii) Explain the circumstances, as described in Sec.  686.43, 
under which a TEACH Grant will be converted to a Direct Unsubsidized 
Loan;
    (iv) Explain that to avoid further accrual of interest as described 
in Sec.  686.12(b)(4)(ii), a grant recipient who decides not to teach 
in a qualified school or field, or who for any other reason no longer 
intends to satisfy the service obligation, may request that the 
Secretary convert his or her TEACH Grant to a Direct Unsubsidized Loan 
that the grant recipient may begin repaying immediately, instead of 
waiting for the TEACH Grant to be converted to a loan under the 
condition described in Sec.  686.43(a)(1)(ii);

[[Page 49825]]

    (v) Emphasize that, once a TEACH Grant is converted to a Direct 
Unsubsidized Loan, it may be reconverted to a grant only if--
    (A) The Secretary determines, based on documentation provided by 
the recipient or in the Secretary's records, that the grant recipient 
was satisfying the service obligation as described in Sec.  686.12 or 
that the grant was converted to a loan in error; or
    (B) In the case of a grant recipient whose TEACH Grant was 
converted to a Direct Unsubsidized Loan in accordance with Sec.  
686.43(a)(1)(i), the grant recipient requests that the Secretary 
reconvert the loan to a grant and is determined to be eligible for 
reconversion in accordance with Sec.  686.43(a)(8); and
    (vi) Review for the grant recipient information on the availability 
of the Department's Federal Student Aid Ombudsman's office.
    (c) * * *
    (4) The exit counseling must--
    (i) Review the terms and conditions of the TEACH Grant agreement to 
serve or repay as described in Sec.  686.12 and emphasize to the grant 
recipient that the four-year service obligation must be completed 
within the eight-year period described in Sec.  686.12;
    (ii) Explain the treatment of a grant recipient who withdraws from 
and then reenrolls in a TEACH Grant-eligible program at a TEACH Grant 
eligible institution as described in Sec.  686.12(c);
    (iii) Inform the grant recipient of the opportunity to request a 
suspension of the eight-year period for completion of the service 
obligation and the conditions under which a suspension may be granted 
in accordance with Sec.  686.41;
    (iv) Provide the grant recipient with information about how to 
identify low-income schools and documented high-need fields;
    (v) Inform the grant recipient that, for the teaching to count 
towards the recipient's service obligation, the high-need field in 
which he or she has prepared to teach must be--
    (A) One of the six high-need fields listed in Sec.  686.2; or
    (B) A high-need field that is listed in the Nationwide List for the 
State in which the grant recipient teaches--
    (1) At the time the grant recipient begins teaching in that field, 
even if that field subsequently loses its high-need designation for 
that State; or
    (2) For teaching service performed on or after July 1, 2010, at the 
time the grant recipient signed the agreement to serve or repay or 
received the TEACH Grant, even if that field subsequently loses its 
high-need designation for that State before the grant recipient begins 
teaching in that field;
    (vi) Emphasize to the grant recipient that if the grant recipient 
fails or refuses to complete the service obligation contained in the 
agreement to serve or repay or fails to meet any other condition of the 
agreement to serve or repay--
    (A) The TEACH Grant must be repaid as a Direct Unsubsidized Loan; 
and
    (B) The grant recipient will be obligated to repay the full amount 
of each grant and the accrued interest from each disbursement date;
    (vii) Explain to the grant recipient that the Secretary will, at 
least annually during the service obligation period, send the recipient 
the notice described in Sec.  686.43(a)(2);
    (viii) Explain the circumstances, as described in Sec.  686.43, 
under which a TEACH Grant will be converted to a Direct Unsubsidized 
Loan;
    (ix) Explain that to avoid further accrual of interest as described 
in Sec.  686.12(b)(4)(ii), a grant recipient who decides not to teach 
in a qualified school or field, or who for any other reason no longer 
intends to satisfy the service obligation, may request that the 
Secretary convert his or her TEACH Grant to a Direct Unsubsidized Loan 
that the grant recipient may begin repaying immediately, instead of 
waiting for the TEACH Grant to be converted to a loan under the 
condition described in Sec.  686.43(a)(1)(ii);
    (x) Emphasize that once a TEACH Grant is converted to a Direct 
Unsubsidized Loan it may be reconverted to a grant only if--
    (A) The Secretary determines, based on documentation provided by 
the recipient or in the Secretary's records, that the grant recipient 
was satisfying the service obligation as described in Sec.  686.12 or 
that the grant was converted to a loan in error; or
    (B) In the case of a grant recipient whose TEACH Grant was 
converted to a Direct Unsubsidized Loan in accordance with Sec.  
686.43(a)(1)(i), the grant recipient requests that the Secretary 
reconvert the loan to a grant and is determined to be eligible for 
reconversion in accordance with Sec.  686.43(a)(8); and
    (xi) Explain to the grant recipient how to contact the Secretary.
    (5) If exit counseling is conducted through interactive electronic 
means, an institution must take reasonable steps to ensure that each 
grant recipient receives the counseling materials and participates in 
and completes the exit counseling.
* * * * *
    (d) Compliance. The institution must maintain documentation 
substantiating the institution's compliance with paragraphs (a) through 
(c) of this section for each TEACH Grant recipient.
    (e) Conversion counseling. (1) At the time a TEACH Grant 
recipient's TEACH Grant is converted to a Direct Unsubsidized Loan, the 
Secretary conducts conversion counseling with the recipient by 
interactive electronic means and by mailing written counseling 
materials to the most recent address provided by the recipient.
    (2) The conversion counseling--
    (i) Informs the borrower of the average anticipated monthly 
repayment amount based on the borrower's indebtedness;
    (ii) Reviews for the borrower available repayment plan options, 
including standard, graduated, extended, income-contingent, and income-
based repayment plans, including a description of the different 
features of each plan and the difference in interest paid and total 
payments under each plan;
    (iii) Explains to the borrower the options to prepay each loan, to 
pay each loan on a shorter schedule, and to change repayment plans;
    (iv) Provides information on the effects of loan consolidation 
including, at a minimum--
    (A) The effects of consolidation on total interest to be paid, and 
length of repayment;
    (B) The effects of consolidation on a borrower's underlying loan 
benefits, including grace periods, loan forgiveness, cancellation, and 
deferment opportunities; and
    (C) The options of the borrower to prepay the loan and to change 
repayment plans;
    (v) Includes debt-management strategies that are designed to 
facilitate repayment;
    (vi) Explains to the borrower the availability of Public Service 
Loan Forgiveness and teacher loan forgiveness;
    (vii) Explains how the borrower may request reconsideration of the 
conversion of the TEACH Grant to a Direct Unsubsidized Loan if the 
borrower believes that the grant was converted to a loan in error, or 
if the borrower can provide documentation showing that he or she was 
satisfying the service obligation as described in Sec.  686.12;
    (viii) Describes the likely consequences of default, including 
adverse credit reports, delinquent debt collection procedures under 
Federal law, and litigation;
    (ix) Informs the borrower of the grace period as described in Sec.  
686.43(c);

[[Page 49826]]

    (x) Provides--
    (A) A general description of the terms and conditions under which a 
borrower may obtain full or partial forgiveness or discharge of the 
loan (including under the Public Service Loan Forgiveness Program), 
defer repayment of the loan, or be granted a forbearance on repayment 
of the loan; and
    (B) A copy, either in print or by electronic means, of the 
information the Secretary makes available pursuant to section 485(d) of 
the HEA;
    (xi) Requires the borrower to provide current information 
concerning name, address, Social Security number, and driver's license 
number and State of issuance, as well as the borrower's permanent 
address;
    (xii) Reviews for the borrower information on the availability of 
the Federal Student Aid Ombudsman's office;
    (xiii) Informs the borrower of the availability of title IV loan 
information in the National Student Loan Data System (NSLDS) and how 
NSLDS can be used to obtain title IV loan status information;
    (xiv) Provides a general description of the types of tax benefits 
that may be available to borrowers;
    (xv) Informs the borrower of the amount of interest that has 
accrued on the converted TEACH Grants and explains that any unpaid 
interest will be capitalized at the end of the grace period; and
    (xvi) In the case of a borrower whose TEACH Grant was converted to 
a Direct Unsubsidized Loan in accordance with Sec.  686.43(a)(1)(i), 
explains that the borrower may request that the Secretary reconvert the 
loan to a grant as provided in Sec.  686.43(a)(8).

0
25. Section 686.40 is revised to read as follows:


Sec.  686.40  Documenting the service obligation.

    (a) If a grant recipient is performing full-time teaching service 
in accordance with the agreement to serve or repay, or agreements to 
serve or repay if more than one agreement exists, the grant recipient 
must, upon completion of each of the four required elementary or 
secondary academic years of teaching service, provide to the Secretary 
documentation of that teaching service on a form approved by the 
Secretary and certified by the chief administrative officer of the 
school or educational service agency in which the grant recipient is 
teaching. The documentation must show that the grant recipient--
    (1) Taught full-time in a low-income school as a highly qualified 
teacher as defined in Sec.  686.2(d); and
    (2)(i) Taught a majority of classes during the period being 
certified in any of the high-need fields of mathematics, science, a 
foreign language, bilingual education, English language acquisition, 
special education, or as a reading specialist; or
    (ii) Taught a majority of classes during the period being certified 
in another high-need field designated by that State and listed in the 
Nationwide List, in accordance with Sec.  686.12(d).
    (b) For purposes of completing the service obligation, the 
elementary or secondary academic year may be counted as one of the 
grant recipient's four complete elementary or secondary academic years 
if the grant recipient completes at least one-half of the elementary or 
secondary academic year and the grant recipient's school employer 
considers the grant recipient to have fulfilled his or her contract 
requirements for the elementary or secondary academic year for the 
purposes of salary increases, tenure, and retirement if the grant 
recipient is unable to complete an elementary or secondary academic 
year due to--
    (1) A condition that is a qualifying reason for leave under the 
Family and Medical Leave Act of 1993 (FMLA) (29 U.S.C. 2612(a)(1) and 
(3));
    (2) A call or order to Federal or State active duty, or Active 
Service as a member of a Reserve Component of the Armed Forces named in 
10 U.S.C. 10101, or service as a member of the National Guard on full-
time National Guard duty, as defined in 10 U.S.C. 101(d)(5); or
    (3) Residing in or being employed in a federally declared major 
disaster area as defined in the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5122(2)).
    (c)(1) A grant recipient who taught in more than one qualifying 
school or qualifying educational service agency during an elementary or 
secondary academic year and demonstrates that the combined teaching 
service was the equivalent of full-time, as supported by the 
certification of one or more of the chief administrative officers of 
the schools or educational service agencies involved, is considered to 
have completed one elementary or secondary academic year of qualifying 
teaching.
    (2) If the school or educational service agency at which the grant 
recipient is employed meets the requirements of a low-income school in 
the first year of the grant recipient's four elementary or secondary 
academic years of teaching and the school or educational service agency 
fails to meet those requirements in subsequent years, those subsequent 
years of teaching qualify for purposes of satisfying the service 
obligation described in Sec.  686.12(b).

0
26. Section 686.41 is revised to read as follows:


Sec.  686.41  Periods of suspension.

    (a)(1) A grant recipient who has completed or who has otherwise 
ceased enrollment in a TEACH Grant-eligible program for which he or she 
received TEACH Grant funds may request a suspension from the Secretary 
of the eight-year period for completion of the service obligation based 
on--
    (i) Enrollment in a program of study for which the recipient would 
be eligible for a TEACH Grant or in a program of study that has been 
determined by a State to satisfy the requirements for certification or 
licensure to teach in the State's elementary or secondary schools;
    (ii) Receiving State-required instruction or otherwise fulfilling 
requirements for licensure to teach in a State's elementary or 
secondary schools;
    (iii) A condition that is a qualifying reason for leave under the 
FMLA;
    (iv) A call to order to Federal or State active duty or Active 
Service as a member of a Reserve Component of the Armed Forces named in 
10 U.S.C. 10101, or service as a member of the National Guard on full-
time National Guard duty, as defined in 10 U.S.C. 101(d)(5);
    (v) Military orders for the recipient's spouse for--
    (A) Deployment with a military unit or as an individual in support 
of a call to Federal or State Active Duty, or Active Service; or
    (B) A change of permanent duty station from a location in the 
continental United States to a location outside of the continental 
United States or from a location in a State to any location outside of 
that State; or
    (vi) Residing in or being employed in a federally declared major 
disaster area as defined in the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5122(2)).
    (2) A grant recipient may receive a suspension described in 
paragraphs (a)(1)(i) through (vi) of this section in one-year 
increments that--
    (i) Does not exceed a combined total of three years under 
paragraphs (a)(1)(i) through (iii) of this section;
    (ii) Does not exceed a total of three years under paragraph 
(a)(1)(iv) of this section;
    (iii) Does not exceed a total of three years under paragraph 
(a)(1)(v) of this section; or

[[Page 49827]]

    (iv) Does not exceed a total of three years under paragraph 
(a)(1)(vi) of this section.
    (b) A grant recipient, or his or her representative in the case of 
a grant recipient who qualifies under paragraph (a)(1)(iv) or (vi) of 
this section, must apply for a suspension on a form approved by the 
Secretary, prior to being subject to any of the conditions under Sec.  
686.43(a)(1) through (5) that would cause the TEACH Grant to convert to 
a Direct Unsubsidized Loan.
    (c) A grant recipient, or his or her representative in the case of 
a grant recipient who qualifies under paragraph (a)(1)(iv) or (vi) of 
this section, must provide the Secretary with documentation supporting 
the suspension request as well as current contact information including 
home address and telephone number.
    (d) On a case-by-case basis, the Secretary may grant a temporary 
suspension of the period for completing the service obligation if the 
Secretary determines that a grant recipient was unable to complete a 
full academic year of teaching or begin the next academic year of 
teaching due to exceptional circumstances significantly affecting the 
operation of the school or educational service agency where the grant 
recipient was employed or the grant recipient's ability to teach.
    (e) The Secretary notifies the grant recipient regarding the 
outcome of the application for suspension.

0
27. Section 686.42 is amended:
0
a. In the section heading by adding the words ``or repay'' after the 
word ``serve'';
0
b. In paragraphs (a)(1) introductory text and (a)(2), by adding the 
words ``or repay'' after the word ``serve'';
0
c. By revising paragraph (b); and
0
d. In paragraph (c)(4), by removing the words ``and the Coast Guard'' 
and adding in their place the words ``the Coast Guard, a reserve 
component of the Armed Forces named in 10 U.S.C. 10101, or the National 
Guard''.
    The revision reads as follows:


Sec.  686.42   Discharge of agreement to serve or repay.

* * * * *
    (b) Total and permanent disability. (1) A grant recipient's 
agreement to serve or repay is discharged if the recipient becomes 
totally and permanently disabled, as defined in 34 CFR 685.102(b), and 
the grant recipient applies for and satisfies the eligibility 
requirements for a total and permanent disability discharge in 
accordance with 34 CFR 685.213.
    (2) If at any time the Secretary determines that the grant 
recipient does not meet the requirements of the three-year period 
following the discharge as described in 34 CFR 685.213(b)(7), the 
Secretary will notify the grant recipient that the grant recipient's 
obligation to satisfy the terms of the agreement to serve or repay is 
reinstated.
    (3) The Secretary's notification under paragraph (b)(2) of this 
section will--
    (i) Include the reason or reasons for reinstatement;
    (ii) Provide information on how the grant recipient may contact the 
Secretary if the grant recipient has questions about the reinstatement 
or believes that the agreement to serve or repay was reinstated based 
on incorrect information; and
    (iii) Inform the TEACH Grant recipient that he or she must satisfy 
the service obligation within the portion of the eight-year period that 
remained after the date of the discharge.
    (4) If the TEACH Grant made to a recipient whose TEACH Grant 
agreement to serve or repay is reinstated is later converted to a 
Direct Unsubsidized Loan, the recipient will not be required to pay 
interest that accrued on the TEACH Grant disbursements from the date 
the agreement to serve or repay was discharged until the date the 
agreement to serve or repay was reinstated.
* * * * *

0
28. Section 686.43 is revised to read as follows:


Sec.  686.43   Obligation to repay the grant.

    (a)(1) The TEACH Grant amounts disbursed to the recipient will be 
converted into a Direct Unsubsidized Loan, with interest accruing from 
the date that each grant disbursement was made and be collected by the 
Secretary in accordance with the relevant provisions of subpart A of 34 
CFR part 685 if--
    (i) The grant recipient, regardless of enrollment status, requests 
that the TEACH Grant be converted into a Direct Unsubsidized Loan 
because he or she has decided not to teach in a qualified school or 
educational service agency, or not to teach in a high-need field, or 
for any other reason; or
    (ii) The grant recipient does not begin or maintain qualified 
employment within the timeframe that would allow that individual to 
complete the service obligation within the number of years required 
under Sec.  686.12.
    (2) At least annually during the service obligation period under 
Sec.  686.12, the Secretary notifies the grant recipient of--
    (i) The terms and conditions that the grant recipient must meet to 
satisfy the service obligation;
    (ii) The requirement for the grant recipient to provide to the 
Secretary, upon completion of each of the four required elementary or 
secondary academic years of teaching service, documentation of that 
teaching service on a form approved by the Secretary and certified by 
the chief administrative officer of the school or educational service 
agency in which the grant recipient taught and emphasizes the necessity 
to keep copies of this information and copies of the recipient's own 
employment documentation;
    (iii) The service years completed and the remaining timeframe 
within which the grant recipient must complete the service obligation;
    (iv) The conditions under which the grant recipient may request a 
temporary suspension of the period for completing the service 
obligation;
    (v) The conditions as described under paragraph (a)(1) of this 
section under which the TEACH Grant amounts disbursed to the recipient 
will be converted into a Direct Unsubsidized Loan;
    (vi) The potential total interest accrued;
    (vii) The process by which the recipient may contact the Secretary 
to request reconsideration of the conversion, the deadline by which the 
grant recipient must submit the request for reconsideration, and a list 
of the specific documentation required by the Secretary to reconsider 
the conversion; and
    (viii) An explanation that to avoid further accrual of interest as 
described in Sec.  686.12(b)(4)(ii), a grant recipient who decides not 
to teach in a qualified school or field, or who for any other reason no 
longer intends to satisfy the service obligation, may request that the 
Secretary convert his or her TEACH Grant to a Direct Unsubsidized Loan 
that the grant recipient may begin repaying immediately, instead of 
waiting for the TEACH Grant to be converted to a loan under the 
condition described in paragraph (a)(1)(ii) of this section.
    (3) On or about 90 days before the date that a grant recipient's 
TEACH Grants would be converted to Direct Unsubsidized Loans in 
accordance with paragraph (a)(1)(ii) of this section, the Secretary 
notifies the grant recipient of the date by which the recipient must 
submit documentation showing that the recipient is satisfying the 
obligation.
    (4) If the TEACH Grant amounts disbursed to a recipient are 
converted to a Direct Unsubsidized Loan, the Secretary notifies the 
recipient of the conversion and offers conversion counseling as 
described in Sec.  686.32(e).

[[Page 49828]]

    (5) Except as provided in paragraph (a)(8) of this section, if a 
grant recipient's TEACH Grant was converted to a Direct Unsubsidized 
Loan, the Secretary will reconvert the loan to a TEACH Grant based on 
documentation provided by the recipient or in the Secretary's records 
demonstrating that the recipient was satisfying the service obligation 
as described in Sec.  686.12 or that the grant was converted to a loan 
in error.
    (6) If a grant recipient who requests reconsideration demonstrates 
to the satisfaction of the Secretary that a TEACH Grant was converted 
to a loan in error, the Secretary--
    (i) Reconverts the loan to a TEACH Grant;
    (ii) Applies any academic years of qualifying teaching service that 
the grant recipient completed before or during the period when the 
grant was incorrectly in loan status toward the grant recipient's four-
year service obligation requirement;
    (iii) Upon reconversion of the loan to a TEACH Grant, provides the 
grant recipient with an additional period of time, equal to eight years 
minus the number of full academic years of teaching that the recipient 
completed prior to the reconversion of the loan to a TEACH Grant, 
including any years of qualifying teaching completed during the period 
when the TEACH Grant was incorrectly in loan status, to complete the 
remaining portion of the service obligation.
    (iv) Ensures that the grant recipient receives credit for any 
payments that were made on the Direct Unsubsidized Loan that was 
reconverted to a TEACH Grant;
    (v) Notifies the recipient of the reconversion to a grant and 
explains that the recipient is once again responsible for meeting all 
requirements of the service obligation under Sec.  686.12; and
    (vi) Requests deletion of any derogatory information reported to 
the consumer reporting agencies related to the grant while it was in 
loan status and furnishes a statement confirming that the grant was 
converted to a loan in error that the recipient may provide to 
creditors until the recipient's credit history has been corrected.
    (7) If a grant recipient who requests reconsideration does not 
demonstrate to the satisfaction of the Secretary that a TEACH Grant was 
converted to a loan in error, the Secretary--
    (i) Notifies the recipient that the loan cannot be converted to a 
TEACH Grant;
    (ii) Explains the reason or reasons why the loan cannot be 
converted to a TEACH Grant; and
    (iii) Explains how the recipient may contact the Federal Student 
Aid Ombudsman if he or she continues to believe that the TEACH Grant 
was converted to a loan in error.
    (8) In the case of a grant recipient whose TEACH Grant was 
converted to a Direct Unsubsidized Loan in accordance with paragraph 
(a)(1)(i) of this section, the Secretary will reconvert the loan to a 
grant and restore the recipient's service obligation if--
    (i) The grant recipient submits a request to the Secretary to 
reconvert the loan to a TEACH Grant;
    (ii) Excluding any periods of suspension granted under Sec.  
686.41, there is sufficient time remaining for the grant recipient to 
complete the required four academic years of qualifying teaching 
service within eight years from the date the grant recipient ceased 
enrollment at the institution where the recipient received the grant 
or, in the case of a student who received a TEACH Grant at one 
institution and subsequently transferred to another institution and 
enrolled in another TEACH Grant-eligible program, within eight years 
from the date the recipient ceased enrollment at the other institution; 
and
    (iii) In the case of a recipient who would not have sufficient time 
remaining to complete the service obligation within the eight-year 
period as described in paragraph (a)(8)(ii) of this section unless the 
recipient qualifies for a suspension under Sec.  686.40, which may be 
granted retroactively, the recipient requests and is determined to be 
eligible for the suspension.
    (9) A TEACH Grant recipient remains obligated to meet all 
requirements of the service obligation under Sec.  686.12, even if the 
recipient does not receive the notices from the Secretary as described 
in paragraph (a)(2) of this section.
    (b) A TEACH Grant that is converted to a loan, and is treated as a 
Direct Unsubsidized Loan, is not counted against the grant recipient's 
annual or aggregate loan limits under 34 CFR 685.203.
    (c) A grant recipient whose TEACH Grant has been converted to a 
Direct Unsubsidized Loan--
    (1) Enters a six-month grace period prior to entering repayment, 
and
    (2) Is eligible for all of the benefits of the Direct Loan Program.

PART 690--FEDERAL PELL GRANT PROGRAM

0
29. The authority citation for part 690 continues to read as follows:

    Authority:  20 U.S.C. 1070a, 1070g, unless otherwise noted.


Sec.  690.75  [Amended]

0
30. Section 690.75 is amended by removing paragraph (d).

PART 692--LEVERAGING EDUCATIONAL ASSISTANCE PARTNERSHIP PROGRAM

0
31. The authority citation for part 692 continues to read as follows:

    Authority:  20 U.S.C. 1070c-1070c-4, unless otherwise noted.


0
32. Section 692.30 is amended by revising paragraph (c)(5) to read as 
follows:


Sec.  692.30   How does a State administer its community service-
learning job program?

* * * * *
    (c) * * *
    (5) Not involve the construction, operation, or maintenance of so 
much of any facility as is used or is to be used for sectarian 
instruction or as a place for religious worship; and
* * * * *

PART 694--GAINING EARLY AWARENESS AND READINESS FOR UNDERGRADUATE 
PROGRAMS (GEAR UP)

0
33. The authority citation for part 694 continues to read as follows:

    Authority:  20 U.S.C. 1070a-21 to 1070a-28.


0
34. Section 694.6 is amended by:
0
a. Revising paragraph (b); and
0
b. Removing paragraph (c).
    The revision reads as follows:


Sec.  694.6   Who may provide GEAR UP services to students attending 
private schools?

* * * * *
    (b) When providing GEAR UP services to students attending private 
schools, the employee, individual, association, agency, or organization 
must be employed or contracted independently of the private school that 
the students attend, and of any other organization affiliated with the 
school, and that employment or contract must be under the control and 
supervision of the public agency.


Sec.  694.10   [Amended]

0
35. Section 694.10 is amended in paragraph (b) by removing the words 
``that is not pervasively sectarian''.

[FR Doc. 2020-14589 Filed 8-7-20; 4:15 pm]
BILLING CODE 4000-01-P